Rupee sinks to new low for second straight day

Depreciation part of regional trend, may not be cause of concern, say dealers.

KARACHI: The Pakistani rupee closed at 91.97/92.02 to the dollar in inter-bank trading on Wednesday, down from Tuesday’s close of 91.65/70 due to higher oil payments, dealers said.

Exchange Companies Association of Pakistan Chairman Malik Bostan said the decline in rupee to record low for the second straight day was not unexpected, and attributed it to higher oil payments and the closing period of the current financial year.

“Besides oil payments, there are other reasons too,” he said. “These include IMF repayments, political uncertainty and tense US-Pakistan relations over Nato supply routes.”

The US dollar has appreciated against most international currencies, including all South Asian currencies in recent days. The Pakistani rupee is no different; rather it has been comparatively stable against the dollar over the last six months and has performed well, he added.

Despite the rupee’s depreciation in the last two days, people should not panic, he advised. “Last year,” he related, “the dollar shot up by five rupees in a short span of time, but soon recovered by four rupees and a lot of small investors lost their money in the ensuing panic.”

But some currency dealers say that they expect a further decline in rupee value in the coming days. They say the rupee will remain under pressure owing to the fact that Pakistan has to repay $4 billion to IMF this year.

Exchange Companies Association of Pakistan Adviser Naeemuddin asserted that Pakistan has enough foreign exchange reserves to repay the IMF in the coming months. He said owing to continuous increases in remittances – that will be touching $13 billion this year – Pakistan will tackle repayments easily.

Meanwhile, South Asian currencies – especially the Indian rupee – have declined considerably in recent months. Over the last couple of weeks, the Indian rupee has fallen to a record low and touched Rs56 to the US dollar on Wednesday.

Published in The Express Tribune, May 24^th, 2012.