Rupee weakens

The rupee on Monday lost 0.67 percent or Rs1.07 to close at 159.86 per US dollar in the interbank market on demand pressures.

The rupee settled at 158.79/dollar in the previous session in the interbank trade. Dealers said the rupee remained volatile during the session due to demand of dollars from importers and in anticipation of further tightening of the monetary policy. The central bank is scheduled to announce policy rates on Tuesday (today).

“Market is expecting a 100 to 150 basis points increase in policy rate by the central bank to tame inflation and rescue rupee depreciation,” a dealer said. The rupee also lost Re1 to end at 160.50 against the US dollar in the open market.

A dealer said a $5.9 billion penalty on Pakistan related to Reko Diq mining also dented the market sentiments. “The plenty will put pressure on dollar inflows.” The State Bank of Pakistan (SBP) reiterated commitment to market-determined exchange rate to correct imbalances and support the buildup of foreign exchange reserves.

“The SBP has announced this change to modernize the foreign exchange rate regime and the functioning of financial markets, and to contribute to a better allocation of resources in the economy,” the International Monetary Fund said in a latest country report following the approval of $6 billion loan program for Pakistan.