Rupee sinks to all-time low at 168.18

The Pakistani currency hit an all-time low close at Rs168.18 against the US dollar in the inter-bank market on Monday due to international payment pressure at a time when the State Bank of Pakistan (SBP) was striving to achieve the foreign currency reserves target of around $12 billion by Tuesday (today).

The rupee hit the new low, though the country received $1.75 billion in fresh loans from international financial institutions last week.

“China may provide $1.4-1.5 billion any moment as it has agreed to roll over a recently paid loan,” Pakistan Kuwait Investment Company (PKIC) Head of Research and Development Samiullah Tariq said while talking to The Express Tribune.

“Pakistan has acquired short-term loans worth around $9-10 billion in the recent past to pay off previously acquired foreign loans,” an expert said. The low supply of dollars in the inter-bank market and high payment requirement kept the rupee under pressure against the US dollar, they said. “The growing pressure on the rupee may ease with the end of fiscal year on June 30. The rupee should recover ground in the early days of July,” he stated.

He, however, did not foresee a significant recovery in the rupee. “It may regain Rs1.5-2 and will be hovering around Rs170 against the greenback by December 2020,” he said.

The rupee dropped Rs0.52 to Rs168.18 against the greenback on Monday. It had closed at Rs163.10 on May 29.

Besides, the decline in the country’s foreign earnings mounted pressure on the rupee from the supply side. “The deterioration in export earnings and slowdown in the receipt of workers’ remittances weakened rupee against the US dollar,” said BMA Capital Executive Director Saad Hashmi. The central bank has recently increased the duration for the receipt of export payments to 180 days from 90 days. Moreover, foreign firms have laid off employees in big numbers. Thousands of Pakistanis are expected to return to Pakistan soon. The situation may lead to a drop in workers’ remittances in the months ahead.

Gold up

The depreciation of the rupee caused an increase in the gold price by Rs1,600 to Rs104,400 per tola (11.66 grams), according to the All Sindh Saraf Jewellers Association (ASSJA).

Pakistan does not produce the precious metal and meets local demand through imports. Accordingly, the rupee-dollar exchange rate plays an important role in determining the bullion price in local markets.

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

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