Rupee weakens

The rupee ended weaker in the interbank foreign exchange market on Tuesday due to dollar demand from importers.

The rupee closed at 151.56/dollar, compared with Tuesday’s closing of 151.47.

In the open market, the rupee traded flat on the back of routine dollar demand. It closed at 152 against the dollar, unchanged from the previous close. Dealers said the financial markets didn’t react negatively to the measures announced in the 2019/20 fiscal year’s budget.

The government presented a tax heavy budget in an effort to provide the much-needed stabilisation and to fulfill IMF conditions (prior actions). The government has fixed the current account deficit target of $6.5 billion for the next fiscal year, compared with $13 billion in FY19, down 50 percent. However, the market participants still expect more episodes of devaluation by the end of this month.

The rupee is likely to further depreciate by four to five percent on the demand of the International Monetary Fund until Pakistan gets an approval from the Fund’s executive board for the $6 billion bailout package, dealers said. However, some dealers believe the current level of the rupee / dollar parity is on equilibrium level and have no pressure to devalue it. Moreover, Pakistan will get oil deferred payment facility from Saudi Arabia in July that will lower external payment pressure and play the role in stabilising the foreign exchange reserves to some extent.