Rupee falls slightly from 4-month high

Drop in foreign currency reserves pulls down currency

KARACHI:

The stabilising Pakistani currency on Friday slightly depreciated to Rs279.19 against the US dollar in the inter-bank market, coming down from over four-month high in the wake of a decline in the central bank’s foreign currency reserves below $8 billion.

According to State Bank of Pakistan’s (SBP) data, the rupee ticked down 0.02%, or Rs0.08, against the greenback amid slowdown in inflows of the foreign currency compared to its demand.

The currency had hit over four-month high at Rs279.11/$ on Thursday. The consolidating rupee saw a nominal depreciation after cumulatively recovering 10%, or Rs28, over five and a half months since hitting the record low close at Rs307.10/$ in the first week of September 2023.

Read Rupee stabilises near 279

The latest drop came following the fall in foreign currency reserves by $63 million to $7.95 billion in the week ended February 23, 2024, according to the central bank’s weekly update.

Technically speaking, the rupee has become overvalued on the global matrix called Real Effective Exchange Rate (REER), which is the value of Pakistani currency against a basket of currencies of global trading partners. REER appreciated to 101.70 in January 2024 compared to 98.3 in December 2023, indicating that there was room for a moderate depreciation.