Rupee slips to new record low in inter-bank market

Oil price spike, looming wheat shortage heap pressure on currency

KARACHI:

The rupee felt the heat of Russia-Ukraine conflict as the currency fell to a fresh all-time low at Rs178.61 against the US dollar in the inter-bank market on Tuesday on the back of surging oil prices coupled with the forecast of wheat shortage, which would increase the import cost for Pakistan.

According to the State Bank of Pakistan (SBP), the rupee had closed at Rs178.31 on Monday.

A report of Arif Habib Limited stated that the rupee shed 0.27% day-on-day while it was down 11.8% since the beginning of current fiscal year in July 2021.

Speaking to The Express Tribune, AA Gold Commodities Director Adnan Agar stated that the rupee was under pressure because a host of factors were strengthening the dollar in the international market.

The US dollar was climbing against most of the currencies around the world, he pointed out. “Moreover, a sharp rise in global oil prices is also mounting pressure on the rupee,” Agar said. “A wheat crisis is on the cards as well, which makes the foreign exchange market jittery.”

Prices of all commodities were on the rise, sparking fears of a big jump in inflation across the globe, he said, adding that local analysts were also forecasting a spike in inflation.

He was of the view that the rupee would remain under pressure until a ceasefire was agreed between Russia and Ukraine and oil prices plunged.

Arif Habib Commodities CEO and Managing Director Ahsan Mehanti said that a high current account deficit and surging import bill were resulting in weakening of the rupee.

“There is speculation in the market as well, which is affecting the movement of rupee against the greenback,” he pointed out.

He revealed that textile exports of Pakistan were under threat due to the Russia-Ukraine war. Furthermore, cement exports were declining because a hike in global coal prices made it costlier, which curtailed import orders.

“The geopolitical conflict will impact the overall export proceeds of Pakistan, which is impacting the local currency,” he said.

Alpha Beta Core Chief Executive Officer Khurram Schehzad stated that the current account deficit had widened to unsustainable levels and that mounted pressure on the rupee.

“The need for dollars is rising because of the surging import bill, hence, the rupee is slipping,” he said.

Published in The Express Tribune, March 9^th, 2022.

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