There was no respite for the rupee as it lost further ground on Wednesday and fell below the 186 mark in the inter-bank market to close at 186.13 against the US dollar.
According to the State Bank of Pakistan (SBP), the Pakistani rupee had closed at Rs185.23 against the greenback on Tuesday.
A report of Arif Habib Limited stated that the rupee declined 0.48% day-on-day and has lost 15.36% since the beginning of current fiscal year on July 1, 2021.
Speaking to The Express Tribune, Arif Habib Commodities CEO and Managing Director Ahsan Mehanti stated that the rupee sank to a new all-time low because of three factors.
“First, the import bill of Pakistan is on the rise as depicted by the recent trade figures,” he said. “Moreover, Pakistan makes payments for oil imports at this time of the year, hence, massive dollar outflow is adding to pressure on the local currency.”
Finally, the foreign exchange market is experiencing high fluctuation because of the political crisis in the country.
To summarise, “these are the three reasons dragging down the value of the rupee every day,” he said.
AA Gold Commodities Director Adnan Agar stated that the current political turmoil was the primary reason driving the depreciation of the rupee.
“The market is not certain about the future,” he said. “This is a tumultuous time because Pakistan needs International Monetary Fund (IMF) loan tranches and it is uncertain whether we will receive the next installment or not.”
Moreover, according to Agar, the market is in a panic mode because at this time every year, lawmakers prepare the budget documents. “There is widespread anxiety over the upcoming budget as well.”
Gold surges to record
The gold price in Pakistan soared to an all-time high at Rs132,800 per tola on Wednesday. The bullion price had stood at Rs132,000 per tola on Tuesday.
Agar added that gold spiked to the new peak driven by the rupee devaluation. “The weakening of the currency impacted the price of gold.” Pakistan is a net importer of the yellow metal.
“There is little to no change in the international price of gold,” he said, adding that gold was trading lower by $15 per ounce on Wednesday compared to Tuesday’s close.
Therefore, “the sole factor impacting the gold price is the rupee devaluation.”
Published in The Express Tribune, April 7th, 2022.
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