- Pressure of import payments and strengthening of dollar cause currency depreciation
The rupee closed near the 211 level after a 0.55% fall against the dollar in the inter-bank market on Friday as pressure piled up due to import payments and the US currency's added strength.
As per the State Bank of Pakistan (SBP), the rupee settled with a depreciation of 0.55% or Rs1.15 to close at 210.95.
The fall on Friday comes despite the IMF staff-level agreement that also covered an additional $1 billion and a nine-month extension of the Extended Fund Facility (EFF) programme, subject to approval of the IMF board.
The revival of the programme is widely considered as crucial for Pakistan that has seen its foreign exchange reserves fall relentlessly with import cover currently standing at less than two months. During the last week, SBP’s reserves decreased by another $99 million to $9.717 billion due to external debt payments.
“The depreciation comes amid import payment pressure,” Saad Hashmey, Executive Director at BMA Capital, told Business Recorder. He said payments for oil, which was purchased at high rates, are now being made.
“The impact of the current oil price drop will be reflected in 1-2 months,” he said.
The market expert believed that as per the Real Effective Exchange Rate (REER), the US dollar should be in a range of 195-200 against the PKR.
Meanwhile, the US dollar hovered below a near two-decade high in Asian trading on Friday. The dollar index, which measures the currency versus six counterparts, edged 0.07% higher to 108.65, after reaching and then falling back from the highest since September 2002 at 109.29 on Thursday.
Traders have ramped up bets that the US Federal Reserve would go for a super-sized tightening at their July 26-27 meeting after data on Wednesday showed consumer price inflation racing at the fastest pace in four decades.
Inter-bank market rates for dollar on Friday
BID Rs 211
OFFER Rs 211.30
In the open market, the PKR lost 50 paisas for both buying and selling against USD, closing at 209 and 211, respectively.
Against Euro, the PKR remained unchanged for both buying and selling, closing at 208 and 210, respectively.
Against UAE Dirham, the PKR lost 40 paisas for both buying and selling, closing at 56.70 and 57.20, respectively.
Against Saudi Riyal, the PKR lost 20 paisas for both buying and selling, closing at 55 and 55.40, respectively.
Open-market rates for dollar on Friday
BID Rs 209
OFFER Rs 211