Tuesday July 05, 2022

Dollar hits Rs182.19 in interbank market

March 29, 2022
Dollar hits Rs182.19 in interbank market

KARACHI: The rupee reached a new record low on Monday, selling at 182.19 against the dollar in the interbank market, as political uncertainty triggered by a no-confidence move against Prime Minister Imran Khan weighed on sentiment, dealers said.

The local unit shed 41 paisa against the greenback to stand at 182.19 compared to Friday’s close at 181.78/dollar. Analysts and dealers both attributed the rupee’s fall to political turmoil as well as low foreign currency reserves and a delay in the International Monetary Fund (IMF) review decision on 7th tranche of the bail out loan.

Analyst Fahad Rauf of Ismail Iqbal Securities said US treasury yields are rising and “the impact is not limited to rupee, but dollar has gained strength against global currencies”. “On local front, political uncertainty and IMF programme delay continue to deepen sentiment.”

Mohammed Sohail, chief executive at Topline Securities, said falling forex reserves, "political uncertainty and increasing foreign travel are putting pressure on rupee”. Foreign exchange reserves declined by $844 million to stand at $21.439 billion during the week ended March 18, down from $22.283 billion a week earlier.

Pakistan’s foreign currency reserves hit their lowest level of the current fiscal year, right when the government was in talks with the IMF for the 7th review under the Extended Fund Facility. Zafar Paracha, general secretary of Exchange Companies Association of Pakistan (ECAP) said the domestic currency started facing pressure a month and a half ago because of the Russia-Ukraine war which pushed up the prices of commodities, especially grains, oil, and steel, etc.

“It started taking a toll on our forex reserves,” he said, reminding that the government also had to pay back the high interest (six to eight percent) Chinese loans. “Although the finance minister has said that the Chinese agreed to rollover ($4.2 billion) debt, an official announcement in this regard is still pending,” he added.

“It (rupee) is not fluctuating the way it did about six to eight months ago, which is positive for both importers and exporters, allowing them to plan ahead.”

Paracha said the rupee would likely continue on its “gradual downward trajectory”, unless there were some major changes on the political or economic front. He appreciated the central bank’s Re1/dollar incentive for exchange companies on surrendering remittances to boost foreign currency supply, and said more support was needed to bring in larger amounts of foreign exchange. “A Rs5 incentive on buying dollars will dent the grey market (hundi/hawala).”