Pakistan’s rupee continued to fall against the US dollar, weakening to its lowest closing level of over 178 for the first time in the inter-bank market on Friday.
As per the State Bank of Pakistan (SBP), the PKR closed at 178.04 against the USD after a day-on-day depreciation of 6 paisas or 0.03%. This is the weakest closing for the rupee against the US dollar in the inter-bank market.
On Thursday, the PKR had closed at the then-record low of 177.98 against the USD.
Cumulatively, the rupee has depreciated over 11% CYTD and 13% on a FYTD basis against the US dollar.
Against USD: Pakistan’s rupee stable in inter-bank market
“The key cause behind the pressure on the rupee has been a widening of the current account,” said SBP Governor Dr Reza Baqir earlier on Friday.
“Some part of the current account weakening is not in our control, such as the global commodity prices but with a number of central banks around the world now beginning to tighten, we are hoping that there will be some easing on global commodity prices,” added the central bank chief.
Pakistan’s trade deficit widened by 111.74% to $20.590 billion during the first five months (July-November) of the current fiscal year 2021-22 as compared to $9.724 billion during the same period of 2020-21.
3rd successive hike: SBP increases key interest rate by 100 basis points, takes it to 9.75%
Inflation rate has already hit 11.5%, prompting the central bank to raise interest rates by another 100 basis points, taking it to 9.75%.
Meanwhile, SBP has invited quotes for Open Market Operations (OMO) in two tenors i.e. i) 07-Day maturity (24-Dec-21) and ii) 63-day maturity (18-Feb-22), informed Ismail Iqbal Securities.
“This would signal the market that the SBP is willing to accept the fixed cost for 2 months, which means policy rates would remain unchanged in the near term,” said Fahad Rauf, Head of Research at Ismail Iqbal Securities.
“This action has likely come in reaction to higher yields in the recent T-bill auction, which the SBP termed as unwarranted in its recent policy statement,” said Rauf.
Against USD: Pakistan’s rupee hits new record low
The expert added that the OMO maturity (today) is Rs1.7 trillion, adding that it would be interesting to see “whether the amount of injection is increased, but more important would the proportion of 63-day OMO”.
Meanwhile, Pakistan’s foreign exchange reserves fell by $89.9 million to $18,568 million.
“The drop confirms payment exceeds receivables,” Asad Rizvi, Ex-Treasury Head of Chase Manhattan, tweeted.
He said that “this is not a very encouraging sign as demand for USD is pushing PKR close to all-time lows,” adding that funding from the International Monetary Fund (IMF) will not be available till January, as demand for USD persists.Business Recorder
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