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Business

October 12, 2017

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Rupee hits two-month low

Rupee hits two-month low

KARACHI: The rupee weakened to its lowest level in two months in the open market on Wednesday, as increased dollar demand and concerns over political stability hit investor sentiment, putting pressure on the exchange rate, currency dealers said.

The rupee was traded at 107.40/60 to the dollar in the kerb market — the lowest since August 2017 on dollar purchase and heightened political uncertainty, dealers added. The domestic currency was at 106.80 and 107 against the dollar on Tuesday.

“Yes....the rupee came under pressure, crossing 107 mark today on increased dollar buying fuelled by higher demand for foreign currency,” said Zafar Paracha, general secretary at Exchange Companies Association of Pakistan.

“There is a panic among investors about ongoing political situation in the country. There are also speculations the government could devalue the local currency amid balance of payments pressure.”  Paracha expects the local unit to recover from its present levels and likely to trade at 106 and 106.50 in a day or two. Analysts said concerns over political unrest and weak macroeconomic fundamentals affect stock market and currency market, especially the open market.

However, the exchange rate remained stable in the interbank foreign exchange market. The rupee/dollar parity quoted almost flat at 105.42/44 against the greenback in interbank market. IMF time and again reiterated its stance that the rupee is overvalued by 10 to 20 percent in real effective terms but the government says the current exchange rates would have no immediate consequences for the economy.

Prime Minister Shahid Khaqan Abbasi recently said the government will not devalue the rupee or seek help from the IMF to address its fiscal challenges. “We have discussed devaluation but it’s not on the cards,” Abbasi said. “There has been a slight decline in the rupee but that’s market based. In fact, because we are linked to the dollar and the dollar is weaker today, there has been a certain devaluation … compared to the other currencies.” Earlier this year rupee had witnessed steep decline of more than Rs3.50 against dollar in one day.

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