Rupee falls to 3-week low

KARACHI: Rupee dropped by 1.26 rupees or 0.72 percent against the dollar in the interbank market on Thursday due to

uncertainty over the talks between Pakistan and the International Monetary Fund for the resumption of $6 billion loan facility.

The rupee closed at 174.19 per dollar, its lowest since October 22. It ended at 172.93 on Wednesday. The rupee depreciated by 2.15 percent during the last four sessions.

The currency lost 1.2 rupees to end at 176.50 versus the greenback in the open market, compared with 175.30 in the previous session.

The local unit saw a sharp rebound in the last week of October after Saudi Arabia announced $3 billion to shore up the country’s foreign exchange reserves and approved funding of deferred oil supply for $1.2 billion.

The country has not been received Saudi financing to boost Pakistan’s foreign currency reserves yet, which is also evident from the latest central bank data.

The reserves held by the country slightly rose to $24.025 billion as of November 5 from $23.925 billion in the previous week.

The rupee has erased all gains as the government is unable to provide clarity on the position of the negotiations being held with the Fund since last month to secure a $1 billion loan tranche and to get the sixth review of the Extended Fund Facility conclusive.

Earlier this month, the adviser to the Prime Minister on Finance Shaukat Tarin said the staff-level agreement with the IMF under the EFF has been reached and the formal accord will be signed soon.

“The prior rupee’s strength was due to the announcement of the Saudi financial support package, but the fresh spell of the currency’s slide is attributed to the ambiguity over the revival of the IMF programme,” said Tahir Abbas, the head of research at the Arif Habib Limited.

“There is no official announcement from the government so far over when the IMF programme will restart so, this factor of uncertainty weakens the sentiment on the rupee.”

The rupee is expected to stabilise at 170 levels once the IMF bailout resumes, he said.

“The demand for the dollars was high, while the supplies remained low. Saudi money and the IMF inflows are likely to boost supplies in the market,” a forex dealer said.

“We have to see whether the central bank let the rupee move freely, allowing it to trade above 175 in the coming days. The market is looking at the State Bank whether it intervenes or takes action to arrest the rupee’s slide.”

Pakistan has adopted a market-based exchange rate system where only market forces determine the currency's move. However, the State Bank of Pakistan does intervene in the market to address disorderly conditions.