- Depreciates another 2.61% in inter-bank market on Monday
Pakistan’s rupee continued to sustain heavy losses against the US dollar in the inter-bank market, closing the session on Monday with another 2.61% fall.
As per the State Bank of Pakistan (SBP), the currency fell Rs7.03 or 2.61% against the US dollar.
On Friday, Pakistan’s rupee had witnessed significant depreciation as well, settling at 262.6 after a fall of Rs7.17 or 2.73%.
Meanwhile, the government moved to pass on the impact of rupee’s drastic fall as Finance Minister Ishaq Dar on Sunday announced a Rs35 increase in the prices of petrol and diesel. The prices of kerosene oil and light diesel oil were also increased by Rs18. The new prices came into effect from Sunday.
Separately, the SBP on Sunday rebutted reports that capping the price of dollar caused loss of $3 billion in remittances and exports.
During the previous week, the rupee depreciated 12.5%, but the bulk of the fall came in the last two sessions – on Thursday and Friday – as the currency was finally let off the hook against the US dollar in the inter-bank market.
Monday’s fall takes combined depreciation across just three sessions to over 14%.
The drastic decrease came as authorities let the exchange rate float freely after apparently keeping it under check through administrative measures for several weeks, a move that widened the gap between the open- and black-markets of foreign currency.
Analysts believe the rupee will see stability as the gap among the three simultaneous currency markets narrows amid hope that arrival of the International Monetary Fund (IMF) mission for the ninth review would lead to revival of the bailout programme.
The free-floating exchange rate was among the key prior conditions of the IMF before it looks to complete the ninth review.
Mustafa Pasha, Chief Investment Officer at Lakson Investments, said the rupee is currently undervalued due to a dollar shortage.
“As per the Real Effective Exchange Rate (REER), rupee remains undervalued,” Pasha told Business Recorder.
“The issue is dollar shortage, which is causing this panic.”
Pasha said the sharp depreciation was expected after the authorities allowed the exchange rate to float freely.
“We have to see how much export proceeds are released and if remittance inflows return to the previous level,” said Pasha, adding that if the IMF programme is successfully revived and if inflows from other creditors arrive, the rupee may see stability.
Inter-bank market rates for dollar on Monday
BID Rs 270
OFFER Rs 272
In the open market, the PKR lost 6 rupees for both buying and selling against USD, closing at 272 and 275, respectively.
Against Euro, the PKR lost 9 rupees for buying and 9.50 rupees for selling, closing at 293 and 296 respectively.
Against UAE Dirham, the PKR lost 2.30 rupees for buying and 2.50 rupees for selling, closing at 74.70 and 75.50, respectively.
Against Saudi Riyal, the PKR lost 2.50 rupees for both buying and selling, closing at 72.80 and 73.50, respectively.
Open-market rates for dollar on Monday
BID Rs 272
OFFER Rs 275
The dollar firmed on Monday and distanced itself from an eight-month trough ahead of a slew of central bank meetings this week, including the Federal Reserve’s, with traders keenly focused on guidance for the path of interest rate rises.
The US dollar index, which measures the greenback against a basket of currencies, rose 0.03% to 101.92, edging away from last week’s eight-month low of 101.50.
Oil prices, a key indicator of currency parity, climbed in early Asia trade on Monday, supported by tensions in the Middle East following a drone attack in Iran and as Beijing pledged over the weekend to promote a consumption recovery which would support fuel demand.