Rupee hits six-week low at 163.10

Currency slides for second straight day as dollar demand-supply gap widens

KARACHI: The Pakistani currency remained on the downtrend for the second successive day as it lost a further Rs1.12 to a six-week low at Rs163.10 to the US dollar in the inter-bank market on Friday following the gap between demand and supply of the foreign currency continued to widen.

Cumulatively, the rupee has depreciated Rs2.18, or 1.35%, in the past two days.

“Low export earnings kept the rupee under pressure,” Exchange Companies Association of Pakistan (ECAP) former secretary general Zafar Paracha told The Express Tribune.

Pakistan was losing export earnings due to the global health crisis caused by Covid-19. Besides, the receipt of export payments remained suspended during Eid holidays from May 22-27, he said.

Additionally, the demand for dollars was apparently going up for fresh imports following a gradual return of businesses to work from partial lowdown in Pakistan.

“The rupee will recover and stay above Rs160 to the greenback next week, partially backed by receipt of new export orders and receipt of withheld export payments,” Paracha said.

Global economies are gradually returning to work. “This should help revive export orders to Pakistan in addition to the ones recently received for personal protective suits and other textile stuff for doctors and paramedical staff from the global health sector,”
he said.

The prevailing foreign currency reserves of the State Bank of Pakistan (SBP) at $12.07 billion would also help the rupee partially recover the loss.

The reserves have gradually been falling since March just after the coronavirus erupted in the country.

They hit almost a six-year high of $12.79 billion on March 6. The reserves stood near the high position after the receipt of emergency loan worth $1.5 billion from the International Monetary Fund (IMF) to fight the contagious disease.

“A $200-400 million drop in reserves will not hurt the rupee, but over $12 billion worth of reserves will provide strength for the local currency,” he said.

Besides, imports have also dropped notably. The oil import bill has alone gone down by half following a significant fall in international crude prices in recent months. This trend would also support the rupee to gain ground next week, he said.

Gold up

The depreciation of the rupee, however, pushed gold prices up to a five-week high at Rs97,200 per tola (11.66 grams).

With a fresh increase of Rs800, the gold price has cumulatively surged Rs2,300 in the last five working days to Rs97,200 per tola, according to the All Sindh Saraf and Jewellers Association.

The surge in gold mostly came in the past two days when the rupee experienced a downward trend.

Published in The Express Tribune, May 30^th, 2020.

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