KARACHI: The rupee is likely to remain under pressure against the US dollar over the coming week due to soaring global commodity prices, forex traders said on Saturday.
The local currency closed at Rs178.51 at the end of the trading week on Friday from the closing level of Rs178.50 last week; lose a rupee against the dollar.
“The global crisis caused by the Russian-Ukrainian conflict has caused commodity prices to soar, especially oil, gas, coal and palm oil,” traders said, recalling that the Pakistan was heavily dependent on the import of these raw materials for its domestic needs.
Crude oil prices peaked at $139 a barrel during the week, and although prices fell, crude oil prices were still high enough to cause Pakistan’s oil import bill to rise, they stated.
The dealers said that the international scenario in view of the Russian-Ukrainian conflict had an impact on the global economy, and Pakistan was no exception due to its dependence on imported energy and food products.
International mediation efforts for the normalization of the situation between Russia
and Ukraine were eagerly awaited by countries, including Pakistan, and it all depended on how events unfold in the coming week, dealers said.
Over the past week, various currencies have lost value against the dollar, they said, adding that the Pakistani rupee had depreciated, but had not lost much in value.
Speaking of the talks between Pakistan and the International Monetary Fund (IMF), where reservations were expressed against the Prime Minister’s relief package for power and oil consumers as well as industry, the dealers said: “The outcome of the talks between Pakistan and the IMF will also determine the course of the Pakistani rupee against the dollar next week.”
The State Bank’s decision to keep the policy rate unchanged indicates that the economic fundamentals are in control of the country’s economic managers, which is a positive sign for the rupiah, they added.
SBP said that despite higher world prices, February’s trade deficit contracted another 10% on a monthly basis on top of January’s 29% decline, confirming slowing domestic demand.
As the current account deficit widened in January, it reflected lumpy imports of oil, vaccines and other items financed by loans and supplier credits.
Dealers said the future prospects of the local currency largely depend on future commodity trends in the international market.
If prices did not stabilize, Pakistan would spend more on energy imports and palm oil, putting pressure on the local currency.