"The central bank has been supporting oil prices and widening twin deficits, obligations of the government as well as providing the necessary support to the market as and when required," she said in a statement.

Dar said he expected central bank foreign exchange reserves to be back over $13 billion by the end of Pakistan's fiscal year on June 30. Reserves stood below $10 billion on May 3.

The low level of reserves limited scope for intervention, dealers said, and there has been speculation that the central bank would soon raise interest rates to support the currency.

The rising uncertainty made banks reluctant to trade, underlined by wide bid/ask spreads quoted in the market.

Trading on the Karachi Stock Exchange (KSE) was thin and nervous. Its benchmark 100-share index shed 5 percent last week, but closed 0.41 percent up on Monday.

POLITICAL STRAINS TAKE TOLL

After three days of talks in London, leaders of the main parties in the coalition, Asif Ali Zardari and Nawaz Sharif, failed on Sunday to break a deadlock over reinstating about 60 judges dismissed by President Pervez Musharraf in November.

Zardari, whose Pakistan People's Party (PPP) leads the four-party coalition, is wary of a confrontation with Musharraf, and is dragging his feet over the issue.

Sharif, a former prime minister and leader of the coalition's second-largest party, had earlier said the judges should be restored by Monday after an earlier deadline passed on April 30.

Having returned to Islamabad on Monday, Sharif was due to meet leaders of his Pakistan Muslim League (Nawaz).

There is speculation that PML-N ministers, including finance minister Dar, could quit Prime Minister Yousaf Raza Gilani's cabinet, but the party is expected to maintain support for the coalition from outside government.

Food Minister Nisar Ali Khan, a senior PML-N minister, met Gilani on Monday and pledged the party's support whatever course of action it decided to take, the prime minister's office said.