Historic weakness: Pakistani rupee hits historic low against US dollar – markets


The rupee continued to decline against the US dollar, closing at an all-time low in the interbank market after even reaching 176 in intraday trading on Friday.

The currency has come under immense pressure in recent days as uncertainty over the International Monetary Fund’s (IMF) program shakes market participants. A higher import bill, a growing current account deficit and inflationary concerns compounded the exchange rate problems.

The all-time low comes just two weeks after the rupee closed at an interbank market low of 175.27 against the dollar.

On Friday, the rupee depreciated for the fifth consecutive time.

According to the State Bank of Pakistan (SBP), the PKR closed at 175.73 against USD after an overnight depreciation of Rs1.54 or 0.88%. On Thursday, the PKR had fallen to 174.19 against USD.

The rupee has lost almost 10% of its value against the US dollar since the start of the calendar year, but almost 14% since its recent high reached on May 7.

Here’s how the rupee worked in 2021:

IMF program ambiguity pushes rupee to over 174 against US dollar

“Uncertainty over talks with the IMF is the reason for the fall of the PKR in the market,” said Saad Hashemy, executive director of BMA Capital. Business recorder.

The market has been eagerly awaiting the IMF’s announcement of the release of $ 1 billion under the Extended Financing Facility and, despite statements by the government’s finance team, the lack of clarity appears to be taking its toll.

Hashemy, however, remained convinced that the devaluation phenomenon is temporary and that the rupee will change direction as soon as the IMF announcement is made.

“From a real effective exchange rate (REER) perspective, the rupee is still lower than the dollar, showing that devaluation has more to do with IMF uncertainty.”

A similar statement was made by Khurram Schehzad, president and CEO of Alpha Beta Core, in a conversation with a private channel.

He said the devaluation of the PKR against the US dollar is due to the delay in the IMF program.

“It would be better to give a deadline for the negotiations,” Schehzad said. “The market faces many psychological impacts due to statements and a delay in an event increases uncertainty.”

He added that the support plan offered by Saudi Arabia had not yet reflected the position of Pakistan’s foreign exchange reserves.

“These reserves played a very critical role in providing immediate relief. All these developments, which are not reflected in the figures at present, have shaken investor confidence, ”he said.

Against USD: Pakistani rupee crosses 175 for first time in history

As the country’s total liquid foreign exchange reserves passed the $ 24 billion mark, analysts on condition of anonymity expressed concern that Pakistan faced a huge funding gap, which will not be closed despite the IMF financing.

“The current account deficit (CAD) is expected to be around $ 12 billion to $ 14 billion, and debt service of $ 15 billion is expected. That translates to just $ 30 billion. In addition, the increase in POL tariffs and freight charges is added to the import bill. It is a difficult phase from a macroeconomic point of view, ”said a market expert.

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