Rupee falls slightly amid higher dollar demand

Pakistani currency ticked down Rs0.05 to Rs277.84 against the US dollar in the inter-bank market on Tuesday, maintaining its downward trend for the second consecutive day on the outlook of higher greenback demand for imports.

According to the State Bank of Pakistan's (SBP) data, the rupee has cumulatively depreciated Rs0.14/$ in the past two working days.

Exchange Companies Association of Pakistan reported that the local currency depreciated Rs0.03 on a day-on-day basis in the open market, closing at Rs278.74/$.

The currency has resumed its downward trend following the aggressive reduction in the SBP's benchmark policy rate by 250 basis points to 15%, which was announced after the closure of markets on Monday.

The rate cut was higher than market's expectation for a reduction of 200 basis points. As a result, the demand for US dollars rose for import payments, as monetary easing always leads to an increase in imports in Pakistan's import-dependent economy.

However, the currency markets ignored significant positive developments. For instance, SBP Governor Jameel Ahmad said recently that Pakistan was expected to receive $500 million in additional financing from the Asian Development Bank (ADB) next week.

Apart from that, the markets also dismissed Ahmad's remarks that the country got robust workers' remittances of over $3 billion in October, in line with the average of $3 billion in the first three months (Jul-Sept) of the current fiscal year.

Pakistani currency has largely remained stable in the range of Rs277-279/$ over the past 10 months amid increased supply of the greenback in the inter-bank market.

A research house projected that the currency would remain stable in the range of Rs277-282/$ by the end of current fiscal year in June 2025.

Pakistan's foreign exchange reserves have increased over $2 billion in the past 14 consecutive weeks to $11.15 billion, supporting the rupee in staying stable against the dollar.