Rupee continues to slide on 10th day
“It (rupee devaluation) could exacerbate imported inflationary pressure and may eventually result in steeper policy rate hikes from the SBP (State Bank of Pakistan),” Fitch Solutions said in a report titled ‘Quick View: Pakistan Rupee Could Weaken Further’. Photo: file
The Pakistani currency continued its slide for the tenth consecutive working day, reaching a one-month low above Rs284 against the US dollar in the interbank market on Friday.
According to State Bank of Pakistan (SBP) data, the local currency dropped by 0.31%, or Rs0.88, to close at Rs284.31 against the greenback.
This decline amounts to a cumulative drop of 2.63%, or Rs7.48, in the past two weeks, compared to its three-month high at Rs276.83 per dollar.
In the open market, the local currency decreased by 0.17%, or Rs0.50, to close at Rs285 per dollar, as reported by the Exchange Companies Association of Pakistan (ECAP).
The rupee’s slide is attributed to the increased demand for foreign currency in the domestic economy, primarily driven by higher sales of automobiles, cement, petroleum oil products, and the repatriation of profits by foreign companies operating in the country.
On a different note, on Thursday, Pakistan’s central bank reported an improvement in the country’s foreign exchange reserves (held by SBP), with an increase of $14 million to reach $7.50 billion in the week ending October 27. This suggests that the supply of foreign currency has been better than the demand for the US dollar in the market.
Read SBP maintains tight monetary policy
Simultaneously, the IMF is conducting a relatively smooth review of Pakistan’s domestic economy under its ongoing $3 billion loan programme. Pakistan has met nearly all the conditions required for the review. The market anticipates that the Fund will approve the second tranche of its loan, amounting to $700 million, upon the completion of the economic review, which will further boost foreign exchange reserves.
Market discussions suggest that the domestic currency may stabilise around its current fair value of approximately Rs285 per dollar soon due to fluctuations in the demand and supply of foreign currency.
Gold prices rise
The local gold pricing body increased the price of gold by Rs1,100 to reach Rs214,400 per tola (11.66 grams) in Pakistan on Friday.
The All Pakistan Sarafa Gems and Jewellers Association reported no change in the global gold price, which remained steady at $2,005 per ounce (31.10 grams) on a day-to-day basis.
Published in The Express Tribune, November 4th, 2023.
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