- Lack of update on IMF talks and political turmoil could hurt the rupee further
The rupee extended its fall for the 14th consecutive session against the US dollar on Tuesday as lack of developments in the government's talks with the International Monetary Fund (IMF), prolonged political uncertainty and lack of clarity on the future of the economy hammered the local currency.
The rupee fell to 201.41, down 0.24%, against the US dollar in the inter-bank market on Tuesday.
The political uncertainty is expected to accelerate as the government said it will not let Pakistan Tehreek-e-Insaf (PTI) hold its long march to Islamabad on May 25. This is expected to deal an additional blow to the local currency.
Although the rupee had hit the 201 per dollar mark multiple times over the past few days in intra-day trading, this is the first time it failed to recover before close.
On Monday, the currency depreciated 0.39% to close at 200.93, with exchange companies reporting surplus availability of dollars and low demand in the open market. They said they were diverting the dollars to the inter-bank market, where demand is higher.
Meanwhile, the market is waiting in vain for positive news from ongoing talks between Pakistan and the IMF but delays in an announcement is adding to the speculation in the market and also supporting the hoarding of the greenback.
If the IMF decides to resume the $6 billion Extended Fund Facility, it will provide much-needed respite to the local currency.
Continuation of the fuel subsidy by the government is not only draining finances and mounting pressure on the rupee but also acting as the largest obstruction in the way of revival of the IMF’s $6 billion Extended Fund Facility.
The market has also brushed off robust current account figures for the month of April. In addition, a continuous dip in State Bank of Pakistan’s foreign currency reserves, which fell to 1.5 months of import cover last week, also dented the local currency.
Fahad Rauf, Ismail Iqbal Securities' Head of Research, told Business Recorder that the reasons for the rupee’s latest fall were more or less the same as the previous sessions.
“Political turbulence and lack of news related to resumption of IMF programme are prolonging the rupee’s losing streak,” he said. “In addition, the planned march by the PTI will only add downward pressures to the local currency in the foreign exchange market.”
Inter-bank market rates for dollar on Tuesday
BID Rs 201.10
OFFER Rs 201.30
In the open market, the PKR gained 5 paisas for buying while losing 20 paisas for selling against USD, closing at 200.75 and 202, respectively.
Against Euro, the PKR lost one rupee for both buying and selling, closing at 212 and 214, respectively.
Against UAE Dirham, the PKR lost 10 paisas for buying while remaining unchanged for selling, closing at 54.80 and 55.20, respectively.
Against Saudi Riyal, the PKR gained 10 paisas for both buying and selling, closing at 52.90 and 53.30, respectively.
Open-market rates for dollar on Tuesday
BID Rs 200.75
OFFER Rs 202