Rupee slides on 9th consecutive day

Hits one-month low near Rs283.50/$ due to increased demand for dollar

KARACHI:

The Pakistani rupee has continued its downward trajectory for the ninth consecutive working day, hitting a one-month low near Rs283.50 against the US dollar in the inter-bank market, primarily due to increased demand for foreign currency.

According to data from the State Bank of Pakistan (SBP), the domestic currency experienced a 0.28% decline, equating to Rs0.78, ultimately closing at Rs283.43 against the US dollar on Thursday.

In the open market, the rupee lost 0.35% or Rs1, concluding at Rs284.50 per US dollar, as reported by the Exchange Companies Association of Pakistan (ECAP).

Data from the Pakistan Bureau of Statistics (PBS) indicated a 20% month-on-month increase in imports, totalling $4.8 billion. This surge in imports reflects the rising demand for foreign currency.

Market sources have suggested that various sectors of the economy, including mobile and energy imports, are witnessing improvements, signaling a moderate revival in economic activities.

Speculation in the market suggests that the recent drop in the rate of return on government debt securities like T-bills in auctions may prompt the central bank to consider cutting interest rates in the near future. This potential move could further intensify the demand for the US dollar in the coming months.

Moreover, the International Monetary Fund (IMF) has initiated its first economic review under the $3 billion loan programme. There is a perception in the market that the IMF is advocating for a more market-driven exchange rate for the rupee against the dollar, placing additional pressure on the local currency.

Recent government actions, including a crackdown on foreign currency smugglers and hoarders, have helped curb currency leakages and supported the rupee’s recovery, appreciating by around 11% or over Rs30 in the past six weeks to reach a three-month high at Rs276.83 per US dollar two weeks ago.

Gold prices rise amid geopolitical tensions

In tandem with the rupee’s depreciation and the ongoing Middle Eastern crisis, local gold prices have seen an increase of Rs1,500, reaching Rs213,300 per tola (11.66 grams) in Pakistan on Thursday.

Global gold prices have surged by $9 to $2,005 per ounce (31.10 grams) due to the Israeli aggression against Palestine. Investors are flocking to gold as a safe haven to protect their savings from devaluation amid these geopolitical tensions.

 

Published in The Express Tribune, November 3^rd, 2023.

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