KARACHI (Reuters) Shares at KSE ended nearly three per cent lower on Monday following worsening relations between Islamabad and Washington, dealers said, but early losses were softened as bargain hunters took advantage of cheaper prices. The KSE benchmark 100-share index fell 2.95 per cent or 341.83 points to end at 11,265.03 on turnover of 79.8 million shares. The market made an intra-day low at 11,150.60 points. Stocks fell sharply lower at KSE as investors reacted to US pressure and allegations against Pakistan army and ISI, said Ahsan Mehanti, director at Arif Habib Investments Ltd. A Pakistani newspaper reported on Monday that Pakistans military will not take action against a militant group Washington blames for an attack against its embassy in Kabul, despite mounting American pressure to do so. Pakistans army chief General Ashfaq Kayani met with his top commanders on Sunday in a special meeting to discuss the security situation, the military said, as the war of words with the United States escalated. In the currency market, the rupee firmed to 87.44/51 to the dollar, compared with Fridays close of 87.57/64 to the dollar, amid a lack of import payments but dealers expect the local unit to come under pressure as payments are typically higher during the end of the month. However in the open market, the rupee was trading at 89.90/90.10 to the dollar. The IMF also projected Pakistans GDP growth for 2011/12 fiscal year at 3.8 per cent, compared with the governments target of 4.2 per cent. In the money market, overnight rates were flat at the top level of 13.40 per cent, unchanged from the Saturdays close amid tight liquidity in the inter bank market.