Rupee hits 2-month low on depreciation fears

Closes in the range of Rs126.10-126.80 against the greenback


Salman Siddiqui September 29, 2018
The Pakistani currency, however, remained stable at Rs124.24 to the US dollar at the officially run inter-bank market. PHOTO: FILE

KARACHI: Pakistani rupee weakened to a two-month low against the US dollar at Rs126 in the open market on Friday on speculation that the International Monetary Fund (IMF) had recommended further depreciation of the rupee, dealers said.

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“The rupee loses value whenever Pakistan holds meeting with the IMF,” Pakistan Forex Association President Malik Bostan said in comments to The Express Tribune.

The rupee closed in the range of Rs126.10-126.80 against the US dollar at various currency exchange companies compared to the previous day when it was in the range of Rs125.50-125.80.

The rupee remained below Rs126 for around two months in the open market.

The Pakistani currency, however, remained stable at Rs124.24 to the US dollar in the inter-bank market, according to the State Bank of Pakistan (SBP).

Bostan said the rupee lost value the very next day after “a private TV channel reported that the IMF had recommended Pakistan to let the rupee depreciate to Rs150 (to the US dollar) and our authorities have agreed to take it down to Rs135.”

“The controversial report sparked panic buying in the market (from individuals) which dragged the rupee down against the US dollar and other major currencies,” he said.

An IMF team is present in Islamabad these days which is holding meetings with Pakistani authorities to review the country’s economic performance.

Many are seeing the meeting as a prelude to negotiations for a new bailout for Pakistan, which is facing growing pressure on its external sector.

Finance Minister Asad Umar said recently that his government would decide whether it is going back to IMF within six weeks. And if Pakistan opts for a fresh bailout, IMF would lend money on stringent conditions.

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Currency dealers demanded the government remove uncertainty by disclosing its plans regarding IMF.

Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha also associated the rupee’s roller-coaster ride with Pakistan-IMF meeting.

He said lack of official word on the meeting made the market panic. “Peoples’ mistrust is rising in PTI government as it is taking action to fix the economy in contradiction to its election manifesto,” he said.

He, however, said it is still relatively a new government in the capital. Nation should give appropriate time to the incumbent government to take right decisions following a thorough assessment.

Another currency dealer at Habib Qatar International Exchange Company said the rupee became cheaper in the open market following a cut in supply for foreign currencies to the dealers.

“Dealers have failed to import dollars (from Dubai) in exchange of other foreign currencies in surplus with the dealers in the last couple of days. This situation created shortage of dollars and made the rupee cheaper,” he said.

He said the situation would normalise in the market from Monday when dealers would import dollars.

Published in The Express Tribune, September 29th, 2018.

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