New historic low: rupee suffers another dramatic fall, closes at 285.09 against US dollar

The Pakistani rupee saw yet another dramatic fall in just over a month, plummeting 6.66% against the US dollar during the trading session on Thursday.

As per the State Bank of Pakistan (SBP), the rupee settled at 285.09 against the greenback, a decline of Rs18.98 in the inter-bank market.

Earlier during the day, the rupee had depreciated to 284.88 against the US dollar in the inter-bank market before posting a minor recovery that proved short-lived.

The rupee had plummeted against the US dollar on Wednesday as well but the fall was less severe as the currency settled at 266.11 after a depreciation of 1.73% or Rs4.61 in the inter-bank market.

The rupee had earlier suffered a dramatic fall when it went from 230.89 to 255.43 on January 26 as the government loosened what were seen as administrative measures to keep the currency in check.

In comments to Business Recorder, Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited (IISL), said the ongoing rupee’s depreciation is part of market correction.

“A significant gap in rates was created between the open and inter-bank markets, which became unsustainable,” said Rauf.

“Moreover, reports around International Monetary Fund (IMF) are also not positive, denting investor sentiment.”

He added volatility would remain until the IMF programme is revived and inflows are materialised.

In a note, CEO Topline Securities Mohammed Sohail said delay in the resumption of the IMF programme is leading to market volatility.

“Delay in IMF funding is creating uncertainty in currency market,” he said.

Tahir Abbas, Head of Research at Arif Habib Limited (AHL), said a number of payments related to imports have been made, leading to pressure on the rupee.

“As it is the start of the month, a number of import payments have been made. Moreover, the government has also loosened its administrative controls to appease the IMF,” he said.

A move to a market-based currency exchange rate regime is one of a list of actions the IMF wants Pakistan to complete to clear its 9th review.

Meanwhile, Pakistan has already taken most of the other prior actions, which include hikes in fuel and energy tariffs, the imposition of new taxation measures, and withdrawal of subsidies in export and power sectors.

“However, the depreciation would flare up inflation further,” said Abbas.

The development came on a day when the SBP was also expected to announce further monetary tightening to control inflation at the central bank’s emergency Monetary Policy Committee meeting.

In a key development, Pakistan’s trade deficit narrowed by 33.18% to $21.3 billion during the first eight months (July-February) of the current fiscal year 2022-23 as compared to $31.879 billion during the same period of last year, the Pakistan Bureau of Statistics (PBS) said.

Internationally, the dollar nursed losses on Thursday as optimism about China’s reopening was supported by encouraging data and underpinned Asian currencies, while sticky inflation had the euro eying its best week in a month and a half.

The dollar lost 0.9% on the euro overnight, and since it moved lower despite US yields rising some are speculating it might have peaked as February’s rally runs out of steam.

Oil prices, a key indicator of currency parity, inched up on Thursday, extending gains from the previous two sessions on signs of a strong economic rebound in China, the world’s top oil importer, though gains were capped by a rise in US crude inventories and concerns over overall global demand.

Inter-bank market rates for dollar on Thursday

BID Rs 285.10

OFFER Rs 288.10

Open-market movement

In the open market, the PKR lost 14 rupees for buying and selling against USD, closing at 285.00 and 288.00, respectively.

Against Euro, the PKR lost 11 rupees for buying and selling, closing at 297.00 and 300.00 respectively.

Against UAE Dirham, the PKR lost 2.30 rupees for buying and 2.20 rupees for selling, closing at 78.00 and 78.70, respectively.

Against Saudi Riyal, the PKR lost 3.50 rupees for buying and selling, closing at 75.50 and 76.20, respectively.

Open-market rates for dollar on Thursday

BID Rs 285

OFFER Rs 288