Currency dips, gold shines

Rupee drops to Rs284.84 vs dollar while gold surges to Rs230,100 per tola as Khan arrested

KARACHI:

The Pakistani currency has once again come under pressure against the US dollar amid further delays in the revival of the International Monetary Fund (IMF) loan programme. The currency dropped 0.35% to Rs284.84 against the dollar in the interbank market, moving by almost Re1 after a prolonged period. However, the surge in gold prices in the global market has supported the precious metal, which hit a new all-time high in domestic markets on Tuesday, soaring by 1.41% to Rs230,100 per tola.

The ongoing uncertainty surrounding the IMF loan programme has been a major contributing factor to the drop in the rupee. Speaking to The Express Tribune, Tahir Abbas, the Head of Research at Arif Habib Limited, said that the rupee may continue to fluctuate in the short term. He also stated that political upheaval, such as the recent arrest of former Premier Imran Khan, is adding to the existing uncertainty and negatively impacting the economy and the rupee.

IMF has required Pakistan to acquire financial commitments worth $6-7 billion from friendly countries to resume the loan programme, and the country has yet to fulfill this condition. Although Pakistan’s Finance Ministry has claimed to have acquired remaining financial guarantees from friendly countries, analysts are doubtful whether the ministry has made full financial arrangements for the loan programme.

The uptick in gold prices in the global market and the depreciation of the rupee have allowed the local billion pricing body to increase the commodity price for local markets., Director of AA Gold Commodity, Adnan Agar noted that the yellow metal would continue to maintain its upward trend in both global and local markets. He also predicted that gold would spike to $2,150 per ounce over the next couple of months.

Read Govt seeks to break IMF gridlock

However, Agar added that the outcome of the US job data announcement and the scheduled meeting between US President Joe Biden and the opposition leader would significantly impact gold prices. If the meeting ends on a positive note, it would likely result in a correction in gold prices in global and local markets. On the other hand, if it ends negatively, it would likely result in a further uptrend in gold prices.

Moreover, the ongoing banking crisis in the US and the move to de-dollarise global trade through the introduction of an alternative global currency could keep the dollar under pressure and support gold over the next couple of months.

As Pakistan remains uncertain about the revival of the IMF programme, the currency may continue to face pressure. While the surge in gold prices may provide some support to the country’s economy, the ongoing political upheaval and the uncertainty surrounding the loan programme may continue to weigh down the economy.

Published in The Express Tribune, May 10^th, 2023.

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