Rupee may take a hit from global commodity prices

KARACHI: Rupee will likely remain under pressure against the US dollar in the coming week due to soaring global commodity prices, currency dealers said on Saturday.

The local currency closed at Rs178.51 at the end of the trading week on Friday compared to the closing level of Rs178.50 last week; shedding one rupee against the dollar.

“The global crisis caused by Russia-Ukraine conflict has caused the surge in prices of commodities, especially oil, gas, coal, and palm oil,” dealers said, reminding that Pakistan was highly dependent on the import of these commodities for domestic needs.

Crude oil prices peaked to $139 per barrel during the week, and though prices did come down, crude oil rates were still high enough to cause a surge in Pakistan’s petroleum import bill, they said.

Dealers said that the international scenario in view of Russia-Ukraine conflict has impacted global economics, and Pakistan was no exception due to its reliance on imported energy and food products.

International efforts to mediate for normalisation of the situation between Russia

and Ukraine was eagerly awaited by countries, including Pakistan, and all depended on how the events turn in the coming week, dealers said.

During the past week, various currencies shed value against dollar, they said, adding that the Pakistani rupee did see depreciation, but did not lose too much of its value.

Speaking of talks between Pakistan and the International Monetary Fund (IMF), where reservations were shown against the prime minister’s relief package for power and oil consumers as well as for industry, dealers said, “The outcome of the talks between Pakistan and IMF will also determine the course of Pakistani rupee against the dollar in the next week.”

The State Bank’s decision to keep the policy rate unchanged speaks about the economic fundamentals being under control of the economic managers of the country, which was a positive sign for the rupee, they added.

SBP said that despite the rise in global prices, the February trade deficit witnessed a further 10 percent contraction on a month-on-month basis on top of the 29 percent decline recorded in January, confirming the slowdown in domestic demand.

While the current account deficit rose in January, this reflected lumpy imports of oil, vaccines and other items financed through loans and supplier credit.

Dealers said that the future outlook of the local currency largely depends on future trends of commodities in the international market.

If the prices did not stabilise, Pakistan would be spending more on the imports of energy and palm oil, resultantly putting pressure on the local currency.