The Pakistani rupee further gained against the US dollar on Friday, its second-successive gain after weeks of depreciation.
As per the State Bank of Pakistan (SBP), the currency closed at 165.62 against the dollar in the inter-bank market, registering an increase of Rs0.19 or 0.11%.
The rupee has depreciated close to 5% since the beginning of FY22, said AKD Securities, which considered the deferral of the International Monetary Fund (IMF) review, and timing difference between foreign exchange flows and dollar Index movement as the main factor behind the devaluation.
“We expect volatility to persist in the short term with risks skewed to the downside, however, in the medium run, possible resumption of the IMF program could instill confidence in the market. That said, exogenous factors present risks to our expectation where early tapering by FED and increase in interest rates could consequently strengthen the dollar,” said AKD Securities in its latest report.
The report added that the currency devaluation will bode well for the country’s textile sector. “Exports occupy 72% share in total sales of our textile sample universe where bouts of devaluation increase price competitiveness of these players resulting in stronger volumes while net positive dollar exposure translates into exchange gains,” it said.
Pakistan’s textile group exports declined by 11.32 percent on month-on-month basis and remained $1.471 billion in July 2021 compared to $1.658 billion in June 2021, the Pakistan Bureau of Statistics (PBS) latest data showed.
Meanwhile, textile group exports witnessed a growth of 15.61 percent on a year-on-year basis and remained $1.471 billion in July 2021 compared to $1.272 billion in July 2020.
Rupee reverses downward slide, gains 0.28%
Pressure on the rupee has increased due to Pakistan's current account deficit that has widened in recent months due to the high import bill. According to provisional foreign trade figures, during the first month of the current fiscal year (2021-22), country's goods import payments increased significantly by 51% to $5.396 billion in July 2021 compared to $3.557 billion July 2020.
Pakistan's current account posted a $773-million deficit during the first month of the current fiscal year (FY22) due to the higher import bill.
Comments
Comments are closed for this article.