Pakistan Rupee (PKR) fell sharply in today’s early trading as the dollar was traded at Rs. 166 in the interbank.
At the time of filing this report, it was being quoted at 165.50/166. The rupee hit an all-time low of 164.05 against the dollar on June 27 last year.
The rupee continued its slide today traded at an all-time high of 166.00 against USD, trading past 164.50, last seen on 27th June 2019.
“Dollar liquidity is thin, which is really squeezing the Rupee. We have a support region at 166.75/$ and may see reasonable supply in that region,” said Eman Khan, an analyst at Tresmark, an application that tracks financial markets.
We haven’t seen any intervention yet by the Central Bank in easing the situation so far.
Eman further stated that the government of Pakistan is negotiating with multilateral parties for a $3.7 billion Corona relief package. If done correctly, it is possible that Pakistan may have a soft landing once the crisis dies down – and that’s a long time from now.
A.A.H Soomro, managing director at Khadim Ali Shah Bukhari Securities stated that this was bound to happen. He added that this is a choice State Bank of Pakistan and the government has willingly taken post aggressive monetary easing this week.
The imported inflation would be negated by falling energy/food prices until supply-shocks kick-in. SBP would have to intervene to prevent the rout. Foreign exchange has been the only functioning market in Pakistan this month until the 150 bps cut.
He emphasized that we can’t afford to let the currency plunge any further.
The massive outflow of hot money has put some pressure on the exchange rate, which pushed the dollar rate to Rs. 166 in the interbank market.
According to the market traders, foreign investors were upset about the sudden decision of policy rate change by the central bank and resorted to panic selling of treasury bills (T-bills).
One of the experts stated that people are now hoarding dollars, after seeing the rise against the Rupee, to book some gains for themselves.
Yaqoob Abubakar from Tresmark noted that importers facing difficulty to pay their inline payments owing to high rates of dollar as market experience supply of shortage, while exporters are sitting on the sidelines as coronavirus pandemic has temporarily halted activity. The situation could be worst if no intervention observed by SBP on a certain level that should be identified
According to latest data released by State Bank of Pakistan (SBP) on Wednesday, cumulatively foreign investors divested some $1.873 billion from their investments in the government securities – Market Treasury Bills (T-Bills) and Pakistan Investment Bonds (PIBS) – during 1st July 2019 to March 23, 2020 period.
With $3.492 billion inflows and $1.873 billion outflows, net foreign investment in the government’s debt instruments, including T-Bills and PIBs stand at $1.619 billion during FY20.
The State Bank of Pakistan (SBP) lowered policy rate by a cumulative 225 basis points to 11 percent in two monetary policy announcements in a week.