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Sunday June 16, 2024

Rupee weaker on dollar demand and Middle East tensions

The rupee ended at 278.12 per dollar in the interbank market, compared with 277.93 at close on Tuesday

By Our Correspondent
April 16, 2024
A foreign currency counts Pakistani rupee notes at a shop in Karachi, on March 2, 2023. — Online
A foreign currency counts Pakistani rupee notes at a shop in Karachi, on March 2, 2023. — Online

KARACHI: The rupee ended weaker on Monday due to dollar demand from importers and rising Middle East tensions, which weighed on Asian currencies and risk assets.

The rupee ended at 278.12 per dollar in the interbank market, compared with 277.93 at close on Tuesday. The rupee also lost ground in the open market. It was trading at 279.66, down from 279.37 in the previous session.

After the markets reopened following a long weekend, dealers said that demand for dollars from importers put pressure on the rupee. Markets were closed from Wednesday to Friday for public holidays on account of Eidul Fitr.

According to analysts, the rupee may face more pressure if the Middle East scenario worsens.“If commodity prices do not stabilise soon, it will have a telling impact on Pakistan’s inflation numbers and which will adversely impact both interest rates and the local currency,” said Faisal Mamsa, CEO of Tresmark.

“There are signs that Iran wants to enact a soft blockade of the Strait of Hormuz, this means there are potential both supply chain disruptions and higher oil prices,” he said.“Importantly, we are still in an environment where we haven’t yet digested the US inflation news and what that means for the Fed, and will they be able to cut rates. We have entered a dangerous period ahead of the U.S. elections.”