Rupee dives to new record low in inter-bank market

Closes at Rs172.78 against greenback owing to uncertainty about IMF talks

Omar Qureshi October 19, 2021


Pakistani rupee failed to take a breather and dipped by an additional Rs1.6 against the US dollar in the inter-bank market on Monday to close at a new all-time low of Rs172.78 primarily due to uncertainty about talks between Pakistan and the International Monetary Fund (IMF).

According to the State Bank of Pakistan (SBP), the local currency had closed at Rs171.18 to a dollar on Friday.

A report of Arif Habib Limited stated that the rupee on Monday experienced the highest single-day decline after March 26, 2020.

The local currency has lost 7.49% of its value since the start of calendar year 2021 and 8.82% since the current fiscal year began on July 1, 2021, the research house said.

Moreover, it has depreciated 11.86% since hitting a recent high of Rs152.28 on May 14, 2021, it added.

Speaking to The Express Tribune, Intermarket Securities Head of Research Saad Ali stated that the market was well aware of the fact that imports were not contracting, hence they would likely be valued at over $6 billion in the ongoing month.

Moreover, increase in international commodity prices further shook the market because it would keep the import bill on the higher side even if Pakistan managed to reduce the volume of import shipments.

There was also an element of uncertainty because the delay in resumption of IMF loan programme had triggered fears of further depreciation of the rupee, he said.

The overall sentiment in the market remained weak due to all these factors, he said.

Read FDI soars to 11-month high in Sept

Endorsing Ali’s views, Arif Habib Corporation Managing Director and CEO Ahsan Mehanti said that the latest drop in the rupee value came in the wake of a ballooning trade deficit coupled with Pakistan’s failure to arrest the increase in imports.

“Besides, there is likelihood of a further hike in interest rate on the back of rising inflation and this factor has also shattered spirits in the market,” he said.

Ismail Iqbal Securities Head of Research Fahad Rauf stated that speculation about discussions with the IMF was the prime factor which fuelled the rupee’s depreciation.

He added that the market also feared that the IMF programme would resume with harsh and stringent conditions.

“Due to this reason, sentiment in equity, fixed income and foreign exchange markets is deteriorating,” he said. “Delay in agreement between Pakistan and the global lender is aiding the drop in rupee’s value.”

Published in The Express Tribune, October 19th, 2021.

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