Rupee continues slide on devaluation worries

KARACHI: The rupee dropped 0.91 percent or Rs1.37 against the dollar in the interbank market on Tuesday, with investors worried about further devaluation in post-budget period, dealers said.

Extending its drops into a second session, the rupee fell to 151.95 per dollar intraday, dealers said.

However, the rupee closed at 151.47 per dollar, compared with Monday’s close of 150.10.

Traders and investors are waiting to see how the financial markets would react to the government’s budget announcement.

Minister of State for Revenue Hammad Azhar presented the fiscal year 2019/20 budget on Tuesday.

The rupee continued its downward slide in the open market, tracking losses in the official market.

It fell about one percent or Rs1.50 against the dollar in the kerb dealings.

The rupee ended at 152 per dollar, compared with 150.50 in the open market.

“The rupee comes under pressure on growing speculation that there will be more bouts of devaluations after the budget,” a dealer said. “The rupee may be weakened by four to five percent more on demand of the International Monetary Fund until Pakistan gets an approval from the Fund’s executive board for the $6 billion bailout package.”

The currency movements since last month also show the central bank has moved toward a market-driven exchange rate.

However, some dealers believe the current level of the rupee/dollar parity was on equilibrium level and there was no pressure to devalue it.

Moreover, Pakistan would get deferred oil payment facility from Saudi Arabia in July, which would lower external payment pressure and stabilise the foreign exchange reserves to some extent.

“The rupee should move between 150 and 155 till December 2019,” another dealer said.

The rupee has fallen 9.05 percent so far this year. It depreciated by 37.05 percent in 2018, and was one of the worst-performing currencies in Asia.

The current account deficit (CAD) remains at sustainable levels averaging more than $1 billion a month, according to a brokerage report.

“Despite the improvement, CAD as percent of GDP fell to -4.8 percent in 10 months of current fiscal year, compared with -6.0 percent in same period last year,” said the report published by Alfalah Securities.

Balance of trade in goods improved by 7.3 percent year-on-year in July-April FY19, the improvement is on account of a 4.9 percent reduction in import bill, amid a 1.9 percent decline in exports, the report said.

Balance of services showcased an improvement of 36 percent, whereas workers remittance increased by 8.5 percent year-on-year, it added.