Wednesday June 07, 2023

Rupee surpasses 203 mark against dollar in interbank market

Pakistani rupee continues to fall, closing at 203.86 after a decline of Rs1.51 against the US dollar

By Web Desk
June 13, 2022

KARACHI: In the first trading session after the budget 2022-23, the Pakistani rupee continued to fall and again surpassed the 203 mark by losing 1.51 in the interbank market on Monday.

The Pakistan Stock Market (PSX) also took a hit as the benchmark KSE-100 index plunged over 1,000 points, falling below 41,000 barrier.

According to the State Bank of Pakistan (SBP), the local currency closed at Rs203.86 against the greenback in the interbank market, surpassing its previous record low of Rs202.83 recorded on June 7.

“The sentiment is negative across all capital markets today,” financial market expert Saad Ali said, painting a bleak picture of the economic situation.

He said that the federal budget for the next fiscal year was being seen as a “major milestone” for the revival of the stalled $6 billion International Monetary Fund (IMF) programme.

However, Ali, stated that the market believes that the federal budget is “insufficient” and the Fund may not accept this budget.

“In line with the statement of Finance Minister Miftah Ismail over the weekend the market players expect that the government might have to revisit its proposed allocations and targets set in the federal budget in order to convince the IMF,” he added.

Ali added that the federal budget has further jeopardised the revival of the much-awaited IMF programme.

He maintained that more clarity is needed as for now the sentiments are the government will have to do more.

It is worth mentioning that on June 7, the local currency closed at an all-time low of Rs202.83, surpassing its previous record low of Rs202 registered on May 26.

Currency analysis

Earlier, in view of the high dollar demand for import payments ahead of fiscal year-end, traders had said that the local currency was expected to remain on the back foot in the current week.

The local currency was volatile, having swung between 200.06 to a new record low of 202.83 per dollar during the outgoing week. It closed at 202.35 to the dollar on Friday.

The rupee dived as a relentless surge in global crude oil prices raised concerns about a sustained rise in imported inflation and widening current account deficit, while fast-depleting foreign exchange reserves were also hurt.

“The local unit is likely to remain volatile in [the] coming sessions owing to persistent high dollar demand for import payments. This volatility can be explained by fiscal year-end position adjustment by banks and corporates,” said a forex trader.

“We expect the rupee to weaken further in [the] days ahead,” he added.

“The decline in remittance inflows is also not a good development for the currency as it aggregates pressure on the external account.”

The remittances dropped by 25.4% month-on-month to $2.3 billion in May.

The country is facing a balance of payments crisis with the central bank’s foreign exchange reserves falling to $9.2 billion, enough to cover 1.35 months of import payments, as well as double-digit inflation.

“The measures announced in the fiscal year 2022/23 will set the direction of the rupee as the market is looking at how the government will implement fiscal consolidation steps unveiled in the finance minister’s budget speech to resume the stalled $6 billion International Monetary Fund (IMF) programme,” said another trader.