Pakistan's rupee slide against the US dollar continued as the currency depreciated 0.06% to close near 178 in the inter-bank market on Wednesday.

As per the State Bank of Pakistan (SBP), the PKR closed at 177.98 against the USD after a day-on-day appreciation of 10 paisas or 0.06%. This is the weakest closing for the rupee against the US dollar in the inter-bank market.

On Monday, the PKR had closed at the then-record low of 177.89 against the USD before gaining a meager one paisa on Tuesday.

Cumulatively, the rupee has depreciated over 11% CYTD and 13% on a FYTD basis against the US dollar.

Against USD: Pakistan's rupee stable ahead of MPC announcement

The depreciation comes a day after the Monetary Policy Committee (MPC) of the central bank met to review economic indicators and take a decision on the key policy rate. It decided to increase the policy rate by 100 basis points to 9.75%.

During the recent round of tightening measures, the SBP has increased the policy rate by 275bps from 7% to 9.75% in addition to increasing the Cash Reserve Requirement (CRR) for banks by 1%.

“As per our channel checks, the yields in secondary market have come off by 10-26bps in shorter tenors (3M-12M), while 30bps in longer tenor (3Y-5Y). This shows that market expectations have tamed, but not significantly,” commented Fahad Rauf, Head of Research at Ismail Iqbal Securities.

“Today’s auction results would be important in setting market expectations,” he said.

3rd successive hike: SBP increases key interest rate by 100 basis points, takes it to 9.75%

“The cut-off rates will come down, mainly because the cut-offs in last auction were irrational and spread between weighted average yields and cut-off was too high. Thus, we expect yields to remain near or above the last auction’s weighted average yields.

“The key thing to note would be participation in relatively longer tenors (6M-12M). If the Government manages to achieve tenor wise targets (3M: PKR 600mn, 6M: 600mn, and 12M: 200mn), the sentiments might change and secondary market yields would correct further. However, if concentration remains in 3M, the hawks would prevail.”

Inter-bank market rates for dollar on Wednesday

BID Rs 177.90

OFFER Rs 178

Open-market movement

In the open market, PKR remained unchanged for buying while gaining 50 paisas for selling against USD, closing at 180 and 180.50, respectively.

Against Euro, the PKR lost 50 paisas for both buying and selling, closing at 201 and 202.50, respectively.

Against UAE Dirham, the PKR gained one paisa for buying while remaining unchanged for selling, closing at 49.90 and 50.30, respectively.

Against Saudi Riyal, the PKR lost 10 paisas for both buying and selling, closing at 47.30 and 47.75, respectively.

Open-market rates for dollar on Wednesday

BID Rs 180

OFFER Rs 180.50