Rupee hits new 1-week low as downtick continues

KARACHI, May 19: Taking cue from the open market, Pakistani rupee maintained its downtick in the inter-bank market for the second consecutive day on Thursday, dropping 0.08%, or Rs0.22, to a new one-week low at Rs285.62 against the US dollar.

The currency came under renewed pressure after it slumped almost Rs7 to around Rs300/$ in the open market on Wednesday, weighed down by the decreasing dollar inflows and a worsening political crisis.

On Thursday, however, the open market saw a nominal recovery of almost Re1 to Rs299/$.

The spread between the two markets has widened to Rs13, which is unusual as historically the gap has remained in the range of Re1 to Rs3.

The steep currency depreciation in the open market stemmed from people’s reluctance to offload their dollar holdings in the hope of further rupee devaluation.

On the other hand, the demand for foreign currencies increased slightly as the Hajj season got underway. People usually buy Saudi riyal and the US dollar ahead of the pilgrimage.

According to the State Bank of Pakistan’s (SBP) data, the rupee closed at Rs285.40 to a dollar in the inter-bank market on Wednesday. It cumulatively dropped 0.23%, or Rs0.66, in the past two days.

Last week, the currency touched an all-time low at Rs299/$.

Market players noted that a massive drop of 42 times month-on-month in the current account surplus to $18 million in April signaled that inflows of the foreign currency had slowed down in the inter-bank market.

The surplus went down on the back of decrease in workers’ remittances and export earnings in April, while imports of services increased.

Experts, however, were of the view that the current account balance would record a small surplus or reach breakeven with the help of continued government’s curbs on imports.

Pakistan has not enough foreign exchange for imports as its reserves stand critically low at $4.4 billion. This has heightened chances of debt default if the International Monetary Fund (IMF) loan programme remains off track.

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