Rupee weakens on import payments

KARACHI: The rupee ended slightly weaker against the dollar in the interbank market on Monday, weighed down by a demand from importers seeking to pay their bills, dealers said.

The local unit fell 0.10 percent to close at 223.91 versus the dollar. It had finished at 223.69 on Friday. In the open market, the domestic currency ended unchanged at 231.50 per dollar.

Dealers said the rupee after seeing no major change last week, lost ground due to some import payments. “We saw a small level of demand from importers seeking to pay their bills. However, banks are often urged to only settle import amounts that match the bank's export amounts. The interbank market's equilibrium is preserved by managing demand and supply,” said a currency dealer.

Pakistan made a payment of $1 billion Sukuk on Friday. However, the investors remained concerned about a fast depletion of the foreign reserves amid dried dollar inflows. The loss of foreign exchange reserves is unquestionably being caused by the servicing and repayment of the debt, the dealer added.

Despite the rupee’s 21 percent decline against the dollar so far in 2022, there is a lot of uncertainty surrounding the Pakistani currency, according to analysts. Since 2019, Pakistan has adopted a market-based exchange rate regime. Even though the official exchange rate has recently remained in the Rs221-225 range, the black market rate is currently trading at a premium of more than 10 percent at Rs240-250.

Except for a few currencies available to travellers at a premium of 3 percent, there is scarcely any foreign currency supply in that market as a result of the central bank’s strict regulations for exchange companies, analysts said. The resurgence of the black market has been badly affecting dollar inflows, particularly inward remittances. Analysts expect the rupee to reach 270 per dollar by June 2023.