Rupee falls as demand and supply gap widens

Currency loses some value for 2nd day in a row; gold rises Rs1,600

KARACHI:

Pakistani currency depreciated Rs0.06 to Rs277.74 against the US dollar in the inter-bank market on Tuesday, following a slowdown in supply of foreign currency and an uptick in demand.

The local currency maintained its losing streak for the second consecutive day, dropping a cumulative Rs0.10 in the past two days, according to the State Bank of Pakistan's (SBP) data.

Despite the fresh fall, the currency has largely remained stable for the past seven months and has moved in a narrow band.

Exchange Companies Association of Pakistan reported that the local currency dropped Rs0.03 on a day-to-day basis in the open market, closing at Rs278.66/$.

Market talk suggests exporters have slowed down the sale of US dollars on the futures counter. At the same time, the demand for dollars has increased in the market.

This widening gap between demand and supply of the foreign currency has resulted in the recent slight depreciation of the Pakistani rupee.

The central bank also reported that the import of non-oil goods had been on the rise, indicating a gradual increase in demand for the US dollar.

The domestic currency markets are continuing to ignore improvements in the outlook on foreign investment and credit flows from the global financial institutions. In one such development, Saudi Arabia has decided to finalise a $1.2 billion oil facility for Pakistan by December this year. In this regard, the kingdom has given assurances to the International Monetary Fund (IMF) as well.

Meanwhile, the price of gold increased Rs1,600 to Rs285,000 per tola (11.66 grams), standing just Rs400 short of the all-time high touched last week.