- This was the rupee's first loss in inter-bank market since July 28
- Currency also loses substantial value in open market
The rupee's 11-session appreciation run ended on Wednesday, as the local currency fell 0.46% against the US dollar in the inter-bank market, signalling that it may have reached its short-term equilibrium.
As per the State Bank of Pakistan (SBP), the rupee closed at 214.88, a depreciation of Re0.98 or 0.46% against the greenback.
Since July 28, the rupee had gained over 12% against the US dollar on positive developments related to dollar inflows from the UAE, Saudi Arabia, and the International Monetary Fund (IMF).
On Tuesday, the rupee registered a marginal gain, settling at 213.90, an appreciation of 0.04% or Re0.08, against the greenback. The gain was lower in magnitude in comparison to the previous sessions. The same day, Pakistan also reported a slight month-on-month decline in remittances, with the amount clocking in at $2.52 billion.
“Drop in remittances growth by 8% on a year on year (YoY) basis in July is a cause of concern which might be due to the lower number of working days,” said Trust Securities and Brokerage Limited (TSBL) in a note.
“Textile exports declined over 13% and food exports fell 22% in July. This is a worrying factor for the economy. Painful hikes in power tariffs and fuel prices add to hyperinflation concerns. This has affected market sentiment,” it added.
Abdullah Umer, an analyst at Ismail Iqbal Securities Limited, said the market is anticipating a delay in the disbursement of funds from the IMF, which has led to a slightly negative sentiment.
“Furthermore, remittance figures were also low, which has affected expectations of the current account deficit,” he added.
Meanwhile, the SBP allowed Exchange Companies to export US dollar on consignment basis.
However, as per the SBP directives, ECs will bring the export proceeds in their USD account maintained with banks in Pakistan within three days.
Malik Bostan, Chairman at the Exchange Companies Association of Pakistan (ECAP), welcomed the central bank's decision, saying that this will help reduce the spread in the inter-bank and open currency markets.
Inter-bank market rates for dollar on Wednesday
BID Rs 214.90
OFFER Rs 215.90
In the open market, the PKR lost 4 rupees for both buying and selling against USD, closing at 215 and 217, respectively.
Against Euro, the PKR lost 5 rupees for both buying and selling, closing at 218 and 220 respectively.
Against UAE Dirham, the PKR lost 1.50 rupees for both buying and selling, closing at 58.70 and 59.20, respectively.
Against Saudi Riyal, the PKR lost 1.20 rupees for both buying and selling, closing at 57.20 and 57.70, respectively.
Open-market rates for dollar on Wednesday
BID Rs 215
OFFER Rs 217