A return of clarity on the economic front and a decline in domestic political noise strengthened the rupee for the third successive session, as it registered a gain of 60 paisas by close in the inter-bank market on Tuesday.
As per the State Bank of Pakistan (SBP), the currency closed at 198.46 after a day-on-day appreciation of 60 paisas or 0.30%. On Monday, the currency had closed at 199.06 after recording an appreciation of 70 paisas or 0.35%.
“The government's decision to partially reduce the subsidies given on petroleum products has taken away some pressure in the currency market, indicating a resumption of the stalled International Monetary Fund (IMF) programme,” Wajid Rizvi, Head of Strategy and Economy at JS Global, told Business Recorder.
Against USD: Rupee strengthens in inter-bank market, closes at 199.06
“The rupee has already lost a lot of ground due to delays in decision making, and it will be difficult to appreciate it to 185 level,” he said.
Oil prices extend gains after EU bans most Russia oil imports
On the other hand, oil prices, a key determinant of currency parity, extended gains on Tuesday after the EU agreed to slash oil imports from Russia, fuelling worries of a tighter market already strained for supply amid rising demand ahead of peak US and European summer driving season.
The surge comes after European Union leaders agreed in principle to cut 90% of oil imports from Russia by the end of 2022, resolving a deadlock with Hungary over the bloc’s toughest sanction yet on Moscow since the invasion of Ukraine three months ago.
The rise in oil prices does not bode well for oil importing Pakistan, which has seen its import bill widen, adding pressure on external payments while strengthening demand for dollars in the market.
“This is a negative development for Pakistan, which is a net oil importer,” said Rizvi. The analyst, however, was of the view that the EU measures would be temporary, as it will not bode well for the multinational bloc.
“The EU can’t generate energy from expensive sources of fuel on a long term basis,” he said.
Inter-bank market rates for dollar on Tuesday
BID Rs 198.40
OFFER Rs 198.60
Open-market movement
In the open market, the PKR gained one rupee for buying and 1.10 rupees for selling against USD, closing at 196.50 and 198.30, respectively.
Against Euro, the PKR lost 50 paisas for both buying and selling, closing at 210.50 and 212.50, respectively.
Against UAE Dirham, the PKR gained 60 paisas for both buying and selling, closing at 53.20 and 53.70, respectively.
Against Saudi Riyal, the PKR gained 40 paisas for both buying and selling, closing at 51.80 and 52.30, respectively.
Open-market rates for dollar on Tuesday
BID Rs 196.50
OFFER Rs 198.30