Rupee hits new low for third straight day

Local currency plummets 1.2% this week.

KARACHI: The rupee hit a new low of 92.10 against the dollar in inter-bank trading on Thursday for the third consecutive day, dealers said.

Exchange Companies Association of Pakistan Chairman Malik Bostan said that the rupee showed stability against the dollar on Thursday despite oil payment pressures.

The rupee has witnessed a sharp decline in the past three days and lost 1.2% of its value, surpassing all market projections.

Meanwhile, analysts cite current account slipping into the deficit territory, IMF repayment of $393 million due May 24 and recent proposals to cut budgeted US aid to Pakistan by 56% for fiscal 2013 as other reasons that added the pressure. The current account balance dipped into deficit of $313 million in April from $150 million surplus in March.

Dollar did not shoot up as it did in last two days, said Bostan; adding that the rupee traded in a smaller range of 10 paisa between 92.00 and 92.10.

Political uncertainty in the country and tense US-Pakistan relations over Nato supply routes have also hit the rupee in recent days, dealers said.

BMA Capital in a research note on Thursday reported that the rupee has depreciated by 7% during the current fiscal year.

On the political front, Pak-US ties have continued to remain sour and resultantly payments on the account of coalition support fund (CSF) amounting to $800 million have been withheld by the US.

Although the economic scenario and consequent weakening of rupee has negative repercussions on macro-economy, the sectors linked to the dollar are going to reap benefits: especially textile, independent power producers, exploration and production and chemicals.

Although most of the economy will be suffer from shrinking profits, oil and gas exploration companies along with Independent Power Producers who have their petroleum product prices linked to the dollar will benefit from the situation, says a BMA Capital research note.

Textile companies, especially exporters, will also receive  the maximum benefit of the rupee depreciation along with improvement in absolute margins on exports. The rupee will remain stable on Friday owing to usual low businesses activities in Pakistan along with closure of oil market in the Middle East. The trend will get clearer on Monday, the note said.

Published in The Express Tribune, May 25^th, 2012.