The consolidating Pakistani currency depreciated Rs0.17 and closed at Rs278.30 against the US dollar in the inter-bank market on Monday, maintaining its fluctuation on both sides of the fence in a narrow band over the past several months.
According to the State Bank of Pakistan’s (SBP) data, the rupee had closed at Rs278.13 against the greenback on Friday – the previous working day.
The latest drop came in the wake of uptick in dollar demand for imports coupled with continuous purchase of surplus supply of foreign currency by the central bank.
According to currency dealers, the rupee appreciates in the morning and remains at elevated levels for most of the time in first half of every day. Later on, the demand and supply situation sets direction for the currency exchange rate.
High foreign debt payments estimated at around $24 billion (including interest costs) in the current fiscal year and the ongoing process for rescheduling Chinese independent poawer producers’ (IPPs) debt of around $15 billion are weighing on the rupee-dollar parity and do not let the local currency appreciate beyond Rs278/$.
The currency has been fluctuating in a narrow band of Rs278-278.63/$ for the last four months.
It has appreciated a net Rs0.04 since the start of current fiscal year on July 1, 2024. It strengthened 2.75% to Rs278.34/$ in the previous fiscal year, which ended on June 30, 2024.
To recall, the currency had appreciated 10.85%, or around Rs30, to Rs277.03/$ from the first week of September 2023 till the last week of March 2024. Later, it settled around Rs278-278.63/$ and has moved in a narrow range over the past four months.
Exchange Companies Association of Pakistan, however, reported that the rupee appreciated Rs0.50 on a day-on-day basis, closing at Rs280/$ in the open market.
Late last week, the SBP reported that Pakistan’s real effective exchange rate (REER) – the value of domestic currency against a basket of currencies of trading partners – dropped 58 basis points to a six-month low near the equilibrium at 100.11 in June 2024 compared to the previous month.
REER had been at 100.69 in May 2024. The global matrix maintained its downturn for the second successive month after touching a multi-year high of 104.44 in April 2024.
The reduction to the near breakeven point of 100 suggests the value of imports has gone up slightly while exports have become competitive.
A REER value below 100 is supportive for countries like Pakistan, which mostly registers a current account deficit owing to higher imports and lower exports.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ