Speculation the former army chief and firm U.S. ally will resign has been mounting since the coalition government, led by the party of assassinated former prime minister Benazir Bhutto, said this month it planned to impeach him.

Prolonged jockeying and uncertainty over Musharraf's position has hurt Pakistan's financial markets and raised concern in Washington and among other allies it is distracting from efforts to control violent militants in the nuclear-armed nation.

The official in the president's office gave no details of the president's address, but the president's chief spokesman, retired Major General Rashid Qureshi, was quoted separately as again denying Musharraf would resign or leave the country.

"President Musharraf is not going to Saudi Arabia or any other country and he will fight impeachment constitutionally," Dawn Television cited Qureshi as saying. Pakistani stocks rose more than 3 percent on Monday in choppy trade as investors waited for the Musharraf speech. The Pakistan rupee rose slightly against the dollar. Investors said a Musharraf resignation would ease uncertainty and boost markets.

The ruling coalition has prepared impeachment charges against Musharraf focusing on violation of the constitution and misconduct.

Coalition officials have been hoping Musharraf would quit to avoid impeachment while some allies have said he should at least answer charges brought against him before stepping down.

Siddiq-ul-Farooq, a spokesman for the coalition party of former prime minister Nawaz Sharif, said: "He is most likely going to resign. He may get safe passage ... He's been trying to get safe passage for the past two months."

"GOOD ALLY"

Officials from Saudi Arabia, as well as the United States and Britain, have been involved in negotiations aimed at ending the confrontation between Musharraf and the government.

Coalition officials said last week Musharraf was ready to quit but was demanding immunity from prosecution.

The United States, which has relied on Musharraf for Pakistani cooperation in its campaign against terrorism, has said the question of Musharraf's future was for Pakistanis to decide.

U.S. Secretary of State Condoleezza Rice said on Sunday that Musharraf has been a "good ally", but she declined to say whether he would receive U.S. asylum if he stepped down.

"This is an issue that is not on the table," Rice said in an interview with Fox News.

Rice said Washington had disagreed with Musharraf's declaration of a temporary state of emergency late last year, but after that "he kept to his word. He took off the uniform. There's now a democratic government in Pakistan".

Musharraf seized power in a 1999 coup but has been isolated since his allies lost a February election. All four provincial assemblies have passed resolutions in recent days pressing him to resign and several old allies have joined the campaign against him.

The political battling over Musharraf's fate has sapped investor confidence and there has been criticism it has taken government attention away from economic problems.

Pakistani stocks are near two-year lows, while its currency has lost nearly a quarter of its value this year. Pakistan also faces major fiscal problems, with Saudi Arabia's help critical to defer an estimated $5.9 billion worth of oil payments.