Rupee falls to all-time low of 153.50; more downsides eyed

KARACHI: The rupee dipped in both the markets on Thursday with the local currency closing an all-time low of 153.50 to a dollar in open trade as the country is attuning itself to a potential IMF's $6 billion loan program that calls for exchange rate adjustment. The central bank’s closing data showed that the rupee fell around one percent or Rs1.34 to settle at 152.90 / dollar compared with the Wednesday’s close of 151.56 in the interbank market.

Tracking a weaker rupee in the official market, the rupee lost Rs1.50 to close at 153.50 to the dollar in the open market. It had ended at 152 in previous session.

A currency dealer said the local unit commenced the day on a much weaker footing, having hit a new record low of 153.80 earlier in the session. The State Bank of Pakistan didn’t intervene to help the battered rupee, the dealer said. “There was a higher demand from importers. Later it turned into panic with the lack of support from the central bank,” said a dealer.

Yaqoob Abubakar, an analyst at Tresmark, an application that tracks financial markets, said the dollar broke two important levels: 152 and 153 in quick succession. “This is due to free-float regime and upcoming IMF repayments. The market seems uncomfortable in next couple of days due to payment pressure.”

Pakistan and the International Monetary Fund (IMF) reached a staff level agreement for the $6 billion loan program that is attached with conditions, including market-based exchange rate, for an approval.

The IMF’s board’s is likely to give an approval for the 39-month extended fund facility by the end of this month. The rupee has lost 9.05 percent this year, after falling 37.05 percent in 2018.

Analysts said the rupee accelerated falls due to increased dollar demand from importers, with traders citing the IMF’s debt repayments pressure. Pakistan has to make $80 million loan repayment to the IMF later this month, an analyst said. The country had completed a three-year $6.4 billion loan program in 2016.

Analysts said the recent slide was expected as Eid holidays just ended. Home remittances during Ramazan were providing a support to rupee but as soon as Ramazan finished the dollar started to creep up, they added. Last week, the foreign exchange reserves also came down keeping extra pressure on the rupee.

Analysts are expecting weaker rupee throughout this year, basing their argument on a fact that the benchmarks and economic targets set with the Washington-based lender would exert depreciating pressure on the exchange rate.

Traders said the foreign exchange market could go too volatile in coming weeks because of the increasing speculation that the rupee would weaken further until the IMF first tranche comes in. High debt payments will add to the volatility, they said. The rupee is expected to touch 160 per dollar next week.

But, the traders said there are chances that the currency would start stabilising after IMF inflows, which would supply fresh dollars into the market. Moreover, Pakistan will get $3.2 billion oil deferred payment facility from Saudi Arabia from July that would also lower external payment pressure.