Thursday July 18, 2024

Rupee falls for third straight session

By Our Correspondent
May 23, 2024
A foreign currency dealer counts US dollars at a shop in Karachi. — AFP/File
A foreign currency dealer counts US dollars at a shop in Karachi. — AFP/File

KARACHI: The rupee fell for the third straight session on Wednesday as importer demand for dollars surpassed greenback sales by exporters, dealers said.

In the interbank market, the rupee ended at 278.47 to the US dollar, weaker from Tuesday’s close of 278.39. The rupee lost eight paisas during the session.“The demand for dollars from importers was there but exporters' conversions were insufficient to meet it. The local currency fell from the mismatch between supply and demand of the greenback in the market,” said a currency dealer.The rupee lost 11 paisas against the US dollar in the open market. The local unit was trading at 279.54 per dollar, down from 279.43 in the previous session.Pakistan’s government has assured the International Monetary Fund that it is committed to maintaining a flexible exchange rate and a transparent interbank market to support external sector rebalancing and reserve building.

“We are committed to ensuring a flexible exchange rate, both to support external rebalancingand as a buffer for shocks, and intend to advance policies to promote a deeper FX market, which would help Pakistan attract private inflows on a sustained basis,” the government said in a letter of intent attached in the IMF’s staff report following the second and final review under the stand-by arrangement.

“Given that limited reserve buffers remain our main constraint to entrenching external stability, we will continue to rebuild foreign reserves, with FX sales limited to episodes of disorderly market conditions and not used to prevent a trend depreciation of the rupee driven by fundamentals,” it added.

“Staff recommended continuing to proactively build reserves via interbank purchases, and positively noted that the reduction of the SBP’s swap/forward position aided the decompression of forward premia,” it said.

“However, the recent stability of the rupee should not lead to renewed expectations that this will persist in the future,” it added.“In this regard, banks should be free to transact in the interbank FX market without any constraints, which together with the SBP’s efforts to improve its functioning, would help build a deeper FX market that can serve as a buffer for shocks.”