KARACHI: Pakistani currency recovered to a six-week high at Rs159.91 against the US dollar in the inter-bank market on Monday whereas gold lost ground to a five-week low at Rs94,800 per tola (11.66 grams) as the lockdown imposed to contain the coronavirus kept playing on investors’ mind.
With a fresh recovery of Rs0.26, the rupee has cumulatively regained Rs1.74, or 1%, in the past three working days to Rs159.91 against the US dollar compared to Rs161.65 on April 28, according to the State Bank of Pakistan (SBP).
Before the market closure, the rupee hit an intra-day high of Rs157.85 against the greenback during the day, according to a market source.
“Low demand for dollar (for import payments and foreign debt repayment) under the lockdown helped the rupee to recover ground,” Next Capital Managing Director Muzammil Aslam said while talking to The Express Tribune.
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“Low volumes of rupee-dollar trade kept the exchange rate volatile in the inter-bank market under the lockdown,” he said.
Furthermore, he added, banks were making limited buying or selling of dollar. The rupee recovers when a few sellers of dollar emerge in the inter-bank market and it loses value when a few buyers appear. “Low volumes always cause price distortion,” he commented.
Aslam pointed out that the demand for dollar remained low since people had stopped their international visits as global flights had been suspended as a precautionary measure to prevent the spread of Covid-19.
Similarly, the faithful could not perform Umrah, which has remained a big source of dollar outflow from Pakistan every year.
Moreover, the supply of dollar also remained thin in the system as a majority of currency exchange companies were closed, he said.
Earlier, the rupee lost value as short-term foreign investors pulled out $2.85 billion from government’s debt securities ie three to 12-month treasury bills since the end of February due to the fast spread of the virus globally. They have so far invested a total of $3.69 billion since July 2019. The local currency recovered when the International Monetary Fund (IMF) provided a low-cost emergency loan of $1.38 billion to Pakistan in late April to fight the health crisis. The World Bank and the Asian Development Bank (ADB) also offered similar packages during the month.
Besides, the G20 countries deferred foreign debt repayments from May to December 2020. The Paris Club is also considering a similar scheme.
“The rupee may remain volatile till the lockdown ends in the country and globally,” the analyst remarked.
Gold loses shine
The gold, however, lost a cumulative Rs2,000 in the past four consecutive working days to a five-week low at Rs94,800 per tola.
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It lost shine despite the recovery of $26 in the last two working days to $1,706 per ounce (31.10 grams) in the international market.
“Low demand for gold pulled its price down,” All Sindh Saraf and Jewellers Association (ASSJA) President Haji Haroon Chand said.
People stopped buying the precious metal and investors abandoned investing in the safe-haven asset after its price shot up to highs in recent times, he said.
Aslam added that gold and jewellery markets were lying closed under the lockdown and people were selling the commodity at lower prices to meet kitchen and other essential needs.
Published in The Express Tribune, May 5th, 2020.
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