Back to depreciation: Rupee falls 0.54% against US dollar

Weakening economic indicators finally ended the rupee’s seven-session winning streak as the currency registered a drop of 0.54% against the US dollar in the inter-bank market on Monday.

As per the State Bank of Pakistan (SBP), the rupee closed at 182.54 after a day-on-day depreciation of 99 paisas, or 0.54%.

Last week, the rupee saw a lengthy appreciation run during a longer six-day week, closing at 181.55 against the US dollar.

Rupee maintains momentum, registers seventh straight gain against US dollar

The currency registered gains in all six sessions, ending with a cumulative 1.72% increase amid clarity on the political front and a return of somewhat positive market sentiment.

However, pressure returned as a widening trade deficit, depleting foreign exchange reserves, and high oil prices took a toll on market sentiment.

Oil prices, a major determinant of currency parity, edged lower on Monday as worries over slowing demand in China balanced support from concern over tight global supply and the deepening Ukraine crisis. However, they remain high for an importing country like Pakistan that has decided to freeze its oil prices in an attempt to protect against inflation.

Pressure also continued to mount on the external side after Pakistan’s trade deficit widened by 70.76% from $20.802 billion in July-March 2020-21 to $35.522 billion in July-March 2021-22.

The trade deficit widened as the country’s imports during July-March 2021-22 totalled $58.877 billion (provisional) as against $39.489 billion during the corresponding period last year, showing an increase of 49.10%.

Pakistan's exports during July-March 2021-22 reached $23.255 billion (provisional) against $18.687 billion during the corresponding period of last year showing an increase of 24.98%.

“The oil import bill continuously remains on a higher side, which is a concern as rising oil prices take toll on market sentiment,” said Abdullah Umer, analyst at Fahad Rauf Securities Limited.

Political clarity seems to be short-lived, added Umer, as the newly formed government led by Prime Minister Shehbaz Sharif struggles to form its cabinet.

“The process of rollover of loans remains dependent on political clarity," he said.

Inter-bank market rates for dollar on Monday

BID Rs 182.45

OFFER Rs 182.55

Open-market movement

In the open market, the PKR lost one rupee for both buying and selling against USD, closing at 182 and 183, respectively.

Against Euro, the PKR lost 10 paisas for buying and 50 paisas for selling, closing at 195.10 and 197, respectively.

Against UAE Dirham, the PKR lost 1.11 rupees for buying and 20 paisas for selling, closing at 49.21 and 49.70, respectively.

Against Saudi Riyal, the PKR lost 20 paisas for both buying and selling, closing at 48.40 and 48.80, respectively.

Open-market rates for dollar on Monday

BID Rs 182

OFFER Rs 183