Rupee drops by 0.23%, loses value for 2nd straight day

Selling slows as exporters offload almost all their holdings

KARACHI:

The Pakistani currency maintained a downward trend for the second consecutive working day as it depressed by 0.23% (or Rs0.50) to close at Rs218.38 against US dollar in the interbank market on Thursday.

The currency had closed at Rs217.88 against the greenback on Wednesday, after a winning streak of 13 consecutive working days.

The rupee had regained 9.14% (or Rs21.92) in the prior 13 days. Pak-Kuwait Investment Company (PKIC) Head of Research Samiullah Tariq said, “The domestic currency has reverted to a downward correction after witnessing a significant recovery over the past two weeks. The rupee had gained in the wake of excessive selling of dollars (including on forward counters) by exporters banking on the positive outlook of the currency.”

“Now exporters have offloaded almost all their holdings and the selling has slowed down. On the other hand, demand for importers has improved as well. The situation has pulled the rupee down,” he said.

Tariq further predicted that the rupee may move within a band of Rs215-225 in the days to come. “The currency may return to a path of recovery once the investments of over $5 billion, promised by multilateral, bilateral creditors and friendly countries, flow into the country.”

“The rupee may, however, continue sliding amid a slowdown in domestic economic activities and an increased demand for the import of food and cotton following the devastating floods. This will also show a surge in inflation readings,” forecasted Tariq.

On the other hand, the US dollar has regained its lost strength against other global currencies and commodities, and international oil prices have also edged upwards; developments that are likely to impact the rupee negatively as well.

Last month, the rupee had recovered by over 9% following Ishaq Dar’s return to the country and appointment as finance minister.

Dar had said the rupee was undervalued and local players (commercial banks) allegedly acted speculatively to unduly undervalue the currency to July’s all-time low near Rs240 against the greenback in September.

Published in The Express Tribune, October 14^th, 2022.

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