Pakistan’s rupee weakened further against the US dollar, depreciating 0.10% in the inter-bank market on Monday.
As per the State Bank of Pakistan (SBP), the PKR closed at 177.89 against the USD after a day-on-day depreciation of 18 paisas or 0.10%. On Friday, PKR closed at the then-record low of 177.71 against the USD.
The rupee has depreciated by 11.28% CYTD and 12.9% on FYTD basis against US dollar.
“Market is not satisfied with flows as trade gap is very high,” Fahad Rauf, Head of Research at Ismail Iqbal Securities told Business Recorder.
Pakistan’s trade deficit widened by 111.74% to $20.590 billion during the first five months (July-November) of current fiscal year 2021-22 as compared to $9.724 billion during the same period of 2020-21.
Rauf said that the upcoming current account deficit figures are expected to be around $2-2.5 billion. “If the trend persists, this would reduce foreign exchange reserves and create pressure.”
Against USD: Pakistan’s rupee weakens to record level
He added that the rupee would get a breather if the trade gap reduces, while increase in remittance will create positive sentiment.
“Rupee is certainly undergoing a fundamental realignment, market remains perplexed about the direction in many ways,” Asad Khan, Ex-Head of Treasury at Chase Manhattan tweeted on Monday.
“Nothing is helping, inflow of funds, higher remittances or interest rate differential with further hike priced in and yet PKR is hovering around all-time high,” he added.
Meanwhile, all eyes are on the upcoming central bank Monetary Policy Committee (MPC) meeting which is scheduled to meet on Tuesday (tomorrow).
“Pakistan is set to return to double-digit interest rates after just 9 months, with Monetary Policy Committee (MPC) of the SBP due to meet tomorrow, likely increasing policy rate by 125-150bps,” stated AKD Securities in its latest report.
The expected hike will push the policy rate to 10.25%.
The report was of the view that the policy setting is likely to weigh upon buildup in trade deficit (Nov’21 at US$5.0bn) along with surprise in inflation during the previous month.Business Recorder
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