Rupee jumps to 161 ahead of monetary policy announcement

In the past six sessions, the currency dropped a cumulative Rs2.54, or 1.61%

Salman Siddiqui July 16, 2019

KARACHI: The rupee maintained downward drive for the seventh straight session ahead of the likely hike in key interest rate on Tuesday.

The rupee further weakened Rs1.44 to Rs161.30 to the US dollar in intra-day trade in the inter-bank market.

"The rupee came under pressure [against the US dollar] on forecast for a further pickup in inflation," Taurus Securities' analyst Mustafa Mustansir said while talking to The Express Tribune.

The State Bank of Pakistan (SBP) is strongly expected to hike key interest rate by 100 basis points to rein the future inflation in the afternoon.

100bps interest rate hike likely

Earlier in the past six sessions, the currency dropped a cumulative Rs2.54, or 1.61 per cent, since Monday last week, closing at Rs159.86 on Monday (yesterday).

The analyst noted the drop in the rupee was not unexpected since it had recovered Rs5-6 to around Rs157 in the prior week. "The rupee has lost on renewed buying in dollars at discounted price," he said.

"The central bank may come into action again when rupee advances its march towards around Rs162-165," he said, recalling the central bank came into action about two weeks ago when the rupee lost to around Rs165 in the inter-bank market.

Going forward, the rupee would remain under pressure due to scheduled repayment of foreign debt worth around $37-38 billion over the next couple of years.

"The pressure further mounted on rupee when an international court of the law imposed penalty worth $6 billion on Pakistan in Reko Diq case, a couple of days ago" Mustansir said.

He said the International Monetary Fund (IMF) assessment that the rupee would lose to Rs172 by 2020 was also playing on currency market participants' minds despite IMF made clarification in this regard, he said.


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