Rupee surges to new 23-month high

Gold price soars to one-month peak at Rs105,500 per tola

KARACHI:

Pakistani rupee hit a new 23-month high of Rs152.27 against the US dollar in the inter-bank market on Friday despite the fact that the country’s foreign currency reserves dropped significantly after the government paid off commercial loans worth $1 billion.

On the contrary, gold price surged Rs1,100, or 1%, to a one-month high of Rs105,500 per tola (11.66 grams) in line with the uptrend in the global market. The precious metal surpassed a three-month high price and was trading above $1,800 per ounce (31.10 grams) in the international market.

The rupee maintained the uptrend for the eighth consecutive working day on Friday. Following a fresh gain of Rs0.32 over the weekend, the rupee has cumulatively surged by Rs2.22 (or 1.44%) in the past eight days against the US dollar, according to data of the State Bank of Pakistan (SBP).

“The rupee is gaining ground against the US dollar due to increased inflow of worker remittances,” Pak-Kuwait Investment Company Head of Research Samiullah Tariq said.

Overseas Pakistanis send high amounts to their families back home ahead of Eidul Fitr every year.

Remittances surged 43% to an eight-month high at $2.72 billion in March 2021 compared to the same month of last year.

The strengthening of the rupee may, however, discourage exports from Pakistan. The currency had hit an all-time low at Rs168.43 to the US dollar on August 26, 2020.

Another analyst termed the uptrend of the rupee temporary. “The rupee may move in the range of Rs152-155 in the short run and weaken to somewhere between Rs158-160 against the US dollar over the next six to eight months,” said AA Gold Commodities Director Adnan Agar.

Read: SBP reserves fall $830m to $15.6b

Gold shines

Gold shined once again in the domestic and global markets on Friday. The commodity surged in the international market after the US reported a poor employment data.

“Poor US jobs data has pushed gold price upwards in the world market,” said AA Gold Commodities Director Adnan Agar.

It hit $1,842 per ounce during the day. “It may test the next resistance level of $1,850 per ounce in a couple of days,” he said.

The price of $1,850 appears to be a strong resistance level and may trigger profit-taking by investors as gold has gained $90 per ounce under the current cycle of price increase.

Gold may continue to move in a range of $1,700 to $1,800 over the next three months. Earlier, it hit an all-time high of $2,070 per ounce in August 2020 amid Covid-19 concerns.

He said gold may not return to the higher side (above $1,850) in the medium term (three months) since cryptocurrencies had become a source of attraction for investors.

“Cryptocurrencies have replaced gold as an asset for investment,” he said.

He said that gold regained strength after US unemployment rate increased to 6.1% in April compared to 5.8% in March, according to the latest data reported on Friday.

The unemployment rate shot up because the US created only 500,000 non-farm jobs compared to the projected 900,000 jobs in April.

“US economy is gradually becoming an overheated economy as the government continues to inject funds by selling bonds to banks and providing direct relief to almost every person in the country,” he said.

The overheating economy may force the central bank to increase interest rate over the next six to seven months. The expected action might prompt renewed buying of gold and push the price beyond $1,850 per ounce, he said.