Rupee loses ground to close at 161.98
Dips Rs1.06 in inter-bank market due to low inflow of foreign currency
A Reuters file photo.
KARACHI:
The Pakistani currency depreciated Rs1.06, or 0.65%, and closed at five-and-half week low at Rs161.98 to the US dollar in the inter-bank market on Thursday apparently due to low inflows of the foreign currency on accounts of significant drop in export earnings and downtick in workers’ remittances.
“The supply of dollars in the market made the rupee weaker and the dollar stronger,” Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan said while talking to The Express Tribune.
The short working days during the ongoing month of May mainly due to six holidays (May 22-27) on account of the last Friday of Ramazan and Eidul Fitr and one holiday on Labour Day (on May 1) also caused low supply of the foreign currency in the system, he said.
He said this was the first working day on Thursday since the central bank reported spike in Pakistan’s current account deficit - difference between the country’s higher foreign expenditure and lower income - to $572 million for April on the last working day; Friday/May 21. “The spike, which was reported after the inter-bank market closure, impacted the rupee-dollar exchange rate,” he said.
He said the one-fourth drop in export earnings and a slowdown of 5% in workers’ remittances alone during the month of April compared to March shrank the supply of foreign currency into the inter-bank market.
Secondly, international travelling has remained suspended under the global lockdown that was a notable source of foreign currency inflows, as foreigners and Pakistani expatriates used to bring a significant amount of cash along with them. They used to exchange the currencies with rupees mostly at currency dealers counters.
“Besides, remittances worth $150 million a month (on an average) are received through us (currency dealers). However, we are estimated to receive not more than $100-110 million this Ramazan compared to $157 million last Ramazan,” he said. The rupee stood at Rs160.92 to the greenback on May 21, the last working day before the latest holidays, according to the State Bank of Pakistan (SBP).
The rupee hit an intra-day low of 162.80 to the greenback during the day session, it was learnt. Some of the research houses have anticipated the rupee depreciating to Rs165-70 to the US dollar by end of June, as the exports and workers remittance may see a further significant drop due to global partial lockdowns imposed to contain the coronavirus.
A senior analyst, who talked on the condition of anonymity said, the foreign current inflow on account of workers’ remittances have nosedived following the end of the month of Ramazan. “Pakistani expats send maximum funds to their families during the fasting month and the historical trend suggests that remittances slow down after Eid. But after Eid, they have fallen much more than what the historical trend suggests…due to the global health and economic crises,” he said.
The pandemic has left millions of people jobless around the globe. Tens of thousands of Pakistani expatriates are waiting for resumption of air travel to return home - mostly from Gulf countries like UAE - since they have lost jobs due to lockdown and petroleum oil pricing crisis as Gulf economics are heavily dependent on oil exports. Another senior analyst, however, expected the rupee to stay at around current levels since the International Monetary Fund (IMF) has resumed the second economic review and Pakistan’s external deficit is fully funded by the global lender under the $6 billion loan programme.
He saw the latest volatility as normal since the market reopened after almost one week. The volatility may return to stability from next week, he anticipated.
Published in The Express Tribune, May 29th, 2020.
The Pakistani currency depreciated Rs1.06, or 0.65%, and closed at five-and-half week low at Rs161.98 to the US dollar in the inter-bank market on Thursday apparently due to low inflows of the foreign currency on accounts of significant drop in export earnings and downtick in workers’ remittances.
“The supply of dollars in the market made the rupee weaker and the dollar stronger,” Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan said while talking to The Express Tribune.
The short working days during the ongoing month of May mainly due to six holidays (May 22-27) on account of the last Friday of Ramazan and Eidul Fitr and one holiday on Labour Day (on May 1) also caused low supply of the foreign currency in the system, he said.
He said this was the first working day on Thursday since the central bank reported spike in Pakistan’s current account deficit - difference between the country’s higher foreign expenditure and lower income - to $572 million for April on the last working day; Friday/May 21. “The spike, which was reported after the inter-bank market closure, impacted the rupee-dollar exchange rate,” he said.
He said the one-fourth drop in export earnings and a slowdown of 5% in workers’ remittances alone during the month of April compared to March shrank the supply of foreign currency into the inter-bank market.
Secondly, international travelling has remained suspended under the global lockdown that was a notable source of foreign currency inflows, as foreigners and Pakistani expatriates used to bring a significant amount of cash along with them. They used to exchange the currencies with rupees mostly at currency dealers counters.
“Besides, remittances worth $150 million a month (on an average) are received through us (currency dealers). However, we are estimated to receive not more than $100-110 million this Ramazan compared to $157 million last Ramazan,” he said. The rupee stood at Rs160.92 to the greenback on May 21, the last working day before the latest holidays, according to the State Bank of Pakistan (SBP).
The rupee hit an intra-day low of 162.80 to the greenback during the day session, it was learnt. Some of the research houses have anticipated the rupee depreciating to Rs165-70 to the US dollar by end of June, as the exports and workers remittance may see a further significant drop due to global partial lockdowns imposed to contain the coronavirus.
A senior analyst, who talked on the condition of anonymity said, the foreign current inflow on account of workers’ remittances have nosedived following the end of the month of Ramazan. “Pakistani expats send maximum funds to their families during the fasting month and the historical trend suggests that remittances slow down after Eid. But after Eid, they have fallen much more than what the historical trend suggests…due to the global health and economic crises,” he said.
The pandemic has left millions of people jobless around the globe. Tens of thousands of Pakistani expatriates are waiting for resumption of air travel to return home - mostly from Gulf countries like UAE - since they have lost jobs due to lockdown and petroleum oil pricing crisis as Gulf economics are heavily dependent on oil exports. Another senior analyst, however, expected the rupee to stay at around current levels since the International Monetary Fund (IMF) has resumed the second economic review and Pakistan’s external deficit is fully funded by the global lender under the $6 billion loan programme.
He saw the latest volatility as normal since the market reopened after almost one week. The volatility may return to stability from next week, he anticipated.
Published in The Express Tribune, May 29th, 2020.