KARACHI: Rupee on Tuesday fell to fresh lows versus dollar as high demand weighed amid scares the rising oil prices might worsen the economically beleaguered country's current account deficit.
In the interbank market, the rupee closed at 169.97 to the dollar, compared with Monday’s close of 169.60, hitting a fresh low for the second straight session.
The rupee ended at 171.80 per dollar in the open market. It had settled at 171.60 in the previous session.
“The dollar demand from importers remained there and the inflows were not enough to meet the demand,” said a currency dealer.
Oil prices rose above $80 a barrel amid a tighter supply and stable demand outlook. Brent, an international benchmark, increased to 80.22 per barrel.
Though the central bank’s foreign exchange reserves
are at a comfort level of $19.54 billion, there were inflows of remittances from Pakistanis working abroad and
Roshan Digital Account, dealers said worries about the fiscal and current account deficits were affecting the local unit.
The domestic currency remains under pressure due to a stubborn rise in imports, surging current account deficit, higher commodity prices, and the uncertain situation in Afghanistan.
The rupee has depreciated by 5.96 percent so far this year. It fell 7.31 percent since the start of FY2022.
The government and the State Bank of Pakistan (SBP) both have announced measures to keep the economy from getting overheated and ease external pressure. The central bank hiked the interest rates.
Analysts said further weakness was likely during the current fiscal year. “We expect the rupee to end FY2022 at 175-176 levels,” said an analyst.
The currency is likely to see more losses taking a cue from the latest monetary policy statement which says, "Since its floatation, rupee has moved in an orderly manner in both directions and has depreciated by only
4.8 percent to date, much less than many other emerging market currencies over the same period,” and also highlights losses of emerging currencies once Fed starts to taper.
“However, the expected resumption of the International Monetary Fund loan programme will bode well for the currency as it will help unlock funding from other international financial institutions as well,” the analyst added.
The government expects Pakistan to successfully complete the sixth and seventh reviews of its $6 billion Extended Fund Facility with the IMF soon.
The SBP sees an upward trend in remittances to continue on the back of an increase in the number of people sending funds to Pakistan and existing users sending more funds to the country.