Historic weakness: Rupee closes at over 184 against US dollar for the first time

A drastic plunge in foreign exchange reserves, ongoing political uncertainty, and high oil prices continued to push Pakistan’s rupee to new lows with the currency closing over the 184 level against the US dollar for the first time after a 0.33% fall in the inter-bank market on Friday.

As per the State Bank of Pakistan (SBP), the rupee closed at 184.09, its weakest level in history, after a day-on-day depreciation of 61 paisas.

The rupee has lost over 17% since its most-recent high achieved in May last year, while on a fiscal year to date (FYTD) basis, the local currency has depreciated by over 14%.

In its most-recent depreciation run, the last time rupee gained against the US dollar was on March 11. It has since depreciated in 13 sessions, while remaining stable in the other.

Rupee hits record low again as market sentiment rattled

Oil prices, a major determinant of currency parity, fell on Friday ahead of a meeting of International Energy Agency (IEA) member nations set to discuss a release of emergency oil reserves alongside a huge planned release by the United States. Brent crude futures were down 71 cents, or 0.7%, to $104.00 a barrel. U.S. West Texas Intermediate (WTI) crude futures were down 92 cents, or 0.9%, at $99.36 a barrel.

On Thursday, U.S. President Joe Biden announced a release of 1 million barrels per day for six months, starting in May.

However, despite the decline, experts believe oil prices remain high for a net importer like Pakistan. Sentiments also remain negative as Pakistan’s foreign exchange reserves witnessed a significant decline, adding to pressure on the local currency.

The reserves held by the State Bank of Pakistan (SBP) decreased by a massive $2.915 billion, falling to $12.05 billion, revealed data released by the central bank on Thursday.

“This decline reflects repayment of external debt, including repayment of a major syndicated loan facility from China,” said the SBP. “The rollover of this syndicated facility is being processed, and is expected shortly.”

This massive $3-billion drop in a week has created pressure on the rupee, Umair Naseer at Topline Securities told Business Recorder.

March: Pakistan’s inflation reading rises to 12.7%

Naseer said that despite China’s commitment, the loans have yet to be rolled over which has raised concerns in the market.

“On the other hand, rising political volatility is also playing on the minds of market players, who are waiting for the International Monetary Fund (IMF) review, which remains delayed,” he said.

“Looking at the present situation, the local currency will remain under pressure and may cross the 185 level,” he said.

Meanwhile, ex-country head at Chase Manhattan, Asad Rizvi, also expressed concern as Chinese financing facilities approach maturity. The “impact of another large payment could be felt in coming weeks which is exerting pressure on the PKR”, he said.

Inter-bank market rates for dollar on Friday

BID Rs 184.20

OFFER Rs 184.30

Open-market movement

In the open market, the PKR lost 50 paisas for both buying and selling against USD, closing at 184.50 and 185.50, respectively.

Against Euro, the PKR gained 50 paisas for both buying and selling, closing at 200.50 and 202.50, respectively.

Against UAE Dirham, the PKR lost 5 paisas for both buying and selling, closing at 49.86 and 50.35, respectively.

Against Saudi Riyal, the PKR lost 15 paisas for both buying and selling, closing at 48.65 and 49.10, respectively.

Open-market rates for dollar on Friday

BID Rs 184.50

OFFER Rs 185.50