- Falling foreign exchange reserves and uncertainty over IMF programme drive currency's depreciation
Pakistan's rupee registered a significant decline against the US dollar in its first trading session after the Eid break, as the currency closed at the 210 level in the inter-bank market on Wednesday.
As per the State Bank of Pakistan (SBP), the currency settled at 210.1, a depreciation of Rs2.19 or 1.04%, against the greenback.
In its previous session on Thursday last week, the local currency had closed at 207.91 after an appreciation of eight paisas or 0.04%. During the shortened week, the rupee fell nearly 1.5% against the US dollar in the inter-bank market, as renewed uncertainty over the International Monetary Fund (IMF) programme disrupted the currency’s upward ride.
Pakistan’s foreign exchange reserves also took a hit, putting the rupee under further pressure, while the central bank announced it was increasing the key interest rate by 125 basis points, taking it to 15%.
Meanwhile, oil prices, a key determinant of currency parity, edged up on Wednesday, a day after prices fell through $100 a barrel for the first time since April, but gains were limited by caution ahead of US inflation data that could weaken the market.
Brent crude futures were up 45 cents, or 0.5%, at $99.97 a barrel, while US West Texas Intermediate crude gained 44 cents, or 0.5%, to $95.27.
The decline in local currency value comes as experts have said that rupee is likely to remain under pressure until resumption of the IMF programme.
“The depreciation was expected post-Eid holidays,” Samiullah Tariq, Head of Research at Pak Kuwait Investment Company Limited, told Business Recorder.
“As markets were closed due to Eid holidays, there were no export LCs available to counter the import payments, which put pressure on the local currency.
“Remittance inflows post a decline after Eid as well, while the dollar is also gaining strength against other currencies."
Tariq added that revival of the IMF programme would bring some relief to the currency market.
Last week, former finance minister Shaukat Tarin had said speculators were driving the rate of dollar upwards, and the greenback should not be more than Rs185 based on Pakistan’s real effective exchange rate (REER), which is the value of a country’s currency against a basket of currencies of global trading partners.
“While exporters are the main speculators, the role of exchange companies and banks cannot be ruled out,” he had said while talking to media persons.
Inter-bank market rates for dollar on Wednesday
BID Rs 210.70
OFFER Rs 210.90
In the open market, the PKR lost 2 rupees for both buying and selling against USD, closing at 209.50 and 211.50, respectively.
Against Euro, the PKR gained 2 rupees for both buying and selling, closing at 209 and 211, respectively.
Against UAE Dirham, the PKR lost 50 paisas for both buying and selling, closing at 56.80 and 57.30, respectively.
Against Saudi Riyal, the PKR lost 50 paisas for buying and 60 paisas for selling, closing at 55 and 55.50, respectively.
Open-market rates for dollar on Wednesday
BID Rs 209.50
OFFER Rs 211.50