Rupee recovers, closes at 160.05 against dollar

In knock-on effect, gold price plunges Rs1,900 to Rs79,600 per tola

KARACHI: The Pakistani currency recovered Rs4 and closed at Rs160.05 in the inter-bank market on Friday. In a domino effect, gold prices plunged Rs1,900 to Rs79,600 per tola (11.66 grams).

The movement in the two markets came after Prime Minister Imran Khan took notice of a colossal drop in the rupee’s value and a sharp rise in gold prices on Thursday. The premier asked the authorities concerned to take measures, especially for controlling rising prices of food items.

The rupee has recovered “possibly due to intervention of the central bank”, Alpha Beta Core CEO Khurram Schehzad told The Express Tribune.

Arif Habib Limited Head of Research Samiullah Tariq said the rupee partially recovered ground following a surge in the supply of dollar in the market. The dollar supply improved following receipt of export proceeds and remittances. Exporters, especially of textile products, opted to receive payments from overseas buyers in dollars as they found the all-time low value of the rupee at 164.05 against the dollar lucrative.

Earlier, many of them had delayed the receipt of payments as prevailing laws allowed them to receive export payments within 120 days of shipment.

“Many exporters do not physically receive the payments. However, they submit receipt documents with the central bank and book to sell future payments on future counters in the inter-bank market,” Tariq said.

The rupee had dived 4.5%, or Rs7.07, in the past two days and closed at the all-time low at Rs164.05 against the greenback on Thursday.

The drop in the rupee’s value came following a spike in the demand for dollar for making big international payments like import payments and foreign debt repayments for June, he said.

“Yesterday (Thursday), the rupee nosedived after the country’s largest oil marketing firm sought dollars for making oil import payment,” he said. “The inter-bank market stands (almost) free to determine the rupee-dollar exchange rate keeping in view the demand and supply of foreign currency. So, the market may continue to see sharp fluctuations in the rupee’s value.”

Schehzad added that the rupee recovered on expected dollar supply on account of Saudi Arabia’s deferred oil facility of $275 million per month from July, Qatari support of $3 billion, expected IMF programme signing on July 3 to be followed by the release of its first tranche of $1 billion and expected inflows from the World Bank and Asian Development Bank (ADB).

Rupee lost 32% in FY19

Cumulatively, the rupee has lost a total of 32%, or Rs38.56, in the outgoing fiscal year 2018-19 and closed at Rs160.04 to the US dollar in the inter-bank market on Friday compared to the opening rate of Rs121.49 on first working day of the year on July 3, 2018.

FY19 has come to an end for the inter-bank market as banks will remain closed on the last two days of the fiscal year (June 29 and 30) on account of weekly holidays.

This is the second consecutive year in which the rupee has dropped sharply against the dollar. The rupee started losing significant ground at the outset of December 2017 when it was hovering at Rs105.05. Since then, it has cumulatively lost 52.35%, or Rs55.

However, the rupee showed signs of recovery when the PTI government won general elections on the assumption that it would bring back the nation’s looted money parked at banks abroad.

Later, the government managed to acquire soft loans worth a total $9.2 billion from friendly countries.

The fast depleting foreign currency reserves  have kept piling on the pressure on the rupee throughout the year. The pressure mounted further since PM Imran changed the economic team in April 2019 to win the International Monetary Fund (IMF) bailout worth $6 billion.

Gold plunges

The price of gold, the imported commodity, nosedived in Pakistan despite a surge of $9 to $1,414 per ounce (31.10 grams) in the London market, the All Sindh Saraf and Jewellers Association (ASSJA) reported. An office-bearer of the association said a sharp recovery of the rupee caused the drop in gold prices as Pakistan did not produce the yellow metal and met its demand through imports. “The rupee’s recovery has cut import cost of the commodity,” he said.

The association announces gold prices at around 4pm every day. 

Published in The Express Tribune, June 29^th, 2019.

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