Rupee drops past 278/dollar in interbank market

KARACHI: The Pakistani rupee weakened to 279.04 against the US dollar in the interbank market on Monday due to increased demand for dollars for import payments.

The rupee had ended at 278.95 on Friday. In the open market, the rupee also declined, trading at 280.88 per dollar, compared with 280.79 in the previous session.

Dealers said that the local currency’s decline was driven by importers purchasing dollars to fulfil their payment obligations. However, the supply of dollars from exporters and remittances was insufficient to meet the demand from importers.

According to data released by the Pakistan Bureau of Statistics, the country’s trade deficit widened to $2.313 billion in January, an 18 per cent increase from the same period last year. Imports rose by 10 per cent year-on-year to $5.233 billion, while exports increased by 5.0 per cent to $2.92 billion. Foreign exchange reserves are on a downward trend, with outflows from special convertible rupee accounts, such as bonds and equities, rising. These factors are putting pressure on the local currency.

Analysts predict that the rupee may decline to 280 this month and could weaken further to 281 by the end of the current quarter. Despite the pressure on the rupee, analysts note that interbank liquidity remains stable. The central bank has effectively managed forex reserves while servicing external debt obligations. The reserves held by the State Bank of Pakistan fell by $76 million to $11.372 billion as of January 24.