Rupee dips again amid supply concerns

The Pakistani currency dropped to Rs281.77 against the US dollar in the open market on Friday, maintaining a downturn for the fifth consecutive working day, potentially leading to further depreciation in the major interbank market.

According to the Exchange Companies Association of Pakistan (ECAP), the currency decreased by 0.06% or Rs0.17 on a day-to-day basis in the retail market.

Cumulatively, it has lost 0.27% or Rs0.67 in the past five days. Currency dealers in the open market attribute this downturn to a reduction in the supply of foreign currency. With fewer individuals coming forward to sell foreign currencies there are concerns of volatility in the local currency.

However, the interbank market has defied this declining trend, with the currency remaining largely stable at Rs279.32 against the greenback, showing an increase of Rs0.02 on a day-to-day basis.

The recent uptick in the forex reserves and improvements in export earnings suggest that the supply of foreign currency has remained higher than the prevailing stable demand, supporting the rupee to maintain an uptrend going forward.

In the past five months, the currency has gained almost 10% or Rs27.78 in the interbank market. The downturn in the open market and the upturn in the interbank market have widened the disparity in the value of the rupee between the two markets to Rs2.45 (0.87%).

Published in The Express Tribune, February 17^th, 2024.

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