KARACHI: The rupee fell to a new all-time low against the dollar on Tuesday as investors feared the current account deficit to stay larger in the coming months, putting the local currency at a risk of further fall, analysts said.
In the interbank market, the rupee closed at 176.79 to the dollar, compared with the previous close of 176.48. It declined 0.18 percent during the session. The rupee saw a last record low closing on December 3, 2021.
The rupee had fallen 10.89 percent against the dollar since July this year, stung by higher imports that surged the country’s trade and current account deficits. A spike in prices of the oil and other commodities in the international market and a stronger domestic demand as a result of the country’s economy rebounded from the coronavirus pandemic contributed to the big current account shortfall.
“Higher than anticipated imports and expected current account deficit in the range of $2.25-$2.50 billion for November 2021 is the major reason for the decline in value of the rupee,” said Tahir Abbas, research head at Arif Habib Limited.
The current account gap swelled to $1.66 billion in October from $1.13 billion in the previous month.
Saudi Arabia at the weekend deposited $3 billion in Pakistan’s central bank’s account under its economic support package. These inflows have boosted the country’s foreign currency reserves to $25 billion and those of the State Bank of Pakistan’s reserves increased to $19 billion. Though, these reserves would reflect on the forex reserves’ data to be issued later this week. However, the funding failed to soothe the nerves of the market.
The country’s reserves fell 1 percent to $22.5 billion as of November 26. The reserves held by the SBP also dropped 1.5 percent to $16 billion. Investors also await $1 billion loan tranche from the IMF under the Extended Fund Faculty once its board grants approval in January.
Analyst Fahad Rauf at Ismail Iqbal Securities, said the market's confidence is shaky and warrants concrete improvements on the external account front.
“With CAD expected at $2.5 billion for November, and crude oil prices starting to go up again, pressure on rupee is continuing,” Rauf said.
“Unless we see a correction in global commodity prices or actual improvement in trade numbers, rupee is expected to trade in the 175-180 range.”
He said hot money flows or IMF deal conclusion can change the course, in which case rupee will make a move towards 170. “Remittances numbers (to be released soon) would also be critical for market confidence,” he added.