KARACHI: The rupee fell to its lowest level in one-and-a-half years on Monday, weighed down by increased demand for dollars and investors’ concerns over volatility in global oil prices amid escalating geopolitical tensions.
In the interbank market, the rupee closed at 283.17 per dollar -- its lowest level since December 2023. The rupee had ended at 282.96 in the previous session. The local unit has depreciated by 1.71 per cent so far this fiscal year.
The rupee saw a decline in value in the open market as well, trading at 285.34 to the dollar from 285.13 in the previous session. Dealers said the dollar demand for imports and other payments pressured the rupee.
In addition, concerns over the surge in oil prices in response to the ongoing Israel-Iran conflict hurt the rupee.However, oil prices declined in Western markets on Monday, reversing Friday’s 7.0 per cent increase, as renewed military strikes by Israel and Iran over the weekend did not impact oil production and export facilities.
The State Bank of Pakistan (SBP) maintained its main interest rate at 11 per cent, as the conflict between Israel and Iran, along with volatile global oil prices, posed additional risks to inflation.
“Going forward, the external outlook is susceptible to multiple risks, which mainly stem from heightened geopolitical tensions, volatility in international oil prices, possible adverse impact of proposed budgetary measures and potential shortfalls in planned financial inflows,” the central bank said in a statement issued following its monetary policy meeting.
Analysts expect the rupee to continue to face pressure and may fall to 284.5 against the dollar by the end of this fiscal year, ending in June, due to the central bank’s dollar buying from the currency market to meet its foreign exchange reserve target.