Rupee weakens further, settles at 221.95 against US dollar

Pakistan’s rupee registered back-to-back losses against the US dollar on Thursday, and declined 0.23% in the inter-bank market, as the greenback rose against other currencies after the Federal Reserve delivered another steep interest rate increase last night.

As per the State Bank of Pakistan (SBP), the rupee closed at 221.95 after a depreciation of Re0.52.

On Wednesday, rupee had settled at 221.43 after a depreciation of Re0.78 or 0.35%.

In a key development, the country’s trade deficit narrowed down by 26.59% to $11.469 billion during the first four months of the current fiscal year compared to $15.624 billion during the same period last year, said the Pakistan Bureau of Statistics (PBS) on Wednesday.

The reduction in trade deficit is positive news for the cash-strapped South Asian economy, but was not enough to arrest the rupee's decline.

Moreover, the SBP and Peoples Bank of China (PBoC) signed a Memorandum of Understanding (MoU) on establishing RMB (Chinese currency) clearing arrangements in Pakistan.

Internationally, the dollar rose on Thursday, buoyed by a sharp rise in Treasury yields, after the Federal Reserve signalled US interest rates will likely peak above where investors currently expect, while the pound fell ahead of a Bank of England policy meeting.

The Fed raised its benchmark funds rate by 75 basis points to 3.75-4% as widely expected.

The dollar initially fell on hints in the Fed’s statement of smaller hikes ahead, but rebounded after Chair Jerome Powell said that the battle against inflation will require borrowing costs to rise further.

The US dollar index rose 0.5% on the day to 112.70, its highest in a week.

Oil prices, a key indicator of currency parity, slipped on Thursday as a US interest rate hike pushed up the dollar and fuelled fears of a global recession, although losses were capped by concerns over tight supply.

Inter-bank market rates for dollar on Thursday

BID Rs 221.95

OFFER Rs 222.95

Open-market movement

In the open market, the PKR lost 50 paisas for buying and 75 paisas for selling against USD, closing at 225.50 and 227.75, respectively.

Against Euro, the PKR lost one rupee for both buying and selling, closing at 233 and 235 respectively.

Against UAE Dirham, the PKR lost 30 paisas for both buying and selling, closing at 65 and 65.50, respectively.

Against Saudi Riyal, the PKR lost 30 paisas for both buying and selling, closing at 62.80 and 63.30, respectively.

Open-market rates for dollar on Thursday

BID Rs 225.50

OFFER Rs 227.75