Pakistan’s rupee dropped to a historic all-time low of Rs. 168.30 against the US dollar on Monday. The rupee lost 97 paisas closing at 168.3 in intraday trade in the interbank market, an all-time low to date.
According to the calculations, the rupee has weakened by around 8.7% against the US dollar, this year.
The reason quoted by the dealers is that there’s a high demand for dollars owing to import payments.
Yaqoob Abubakar from Tresmark, an application that tracks financial markets, told ProPakistani,
As per the report, Pakistan’s imports rose by 30% in June to $3.7 billion and the same trend is continuing in July. As the economy is gaining momentum since last month and import demand is huge, we foresee that rupee will remain under pressure in the month of July as there is no sufficient inflow to balance the supply and demand.
A.A.H Soomro, managing director at Khadim Ali Shah Bukhari Securities told ProPakistani,
This could be because of the heightened demand for currency because of imports. Moreover, the IMF tranche seems to be delayed – the program is intact – that’s why currency would mildly find its equilibrium.
The Rupee showed some volatility in today’s session and traded in a range of Rs. 1.19 against the greenback touching an intraday high of Rs. 168.50.
According to market sources, a Pakistani Bank is currently on the buying side of the US dollar. The reasons could be debt/interest payments or the payment against the bookings.
Fitch Solutions, the global research house, in its report ‘EM Asia Currency Round-Up: Gains Ahead As Greenback Outlook Cools’ predicted that the unit (rupee) will continue to trade weaker, forecasting the rupee to average Rs. 163/US dollar in (calendar year) 2020.
“Over the long-term, we forecast the Pakistani rupee to average weaker at Rs. 171.15/US dollar in 2021 due to higher structural inflation vis-à-vis the US,” it added.
However, Fitch Solutions doesn’t see free-fall in rupee value owing to foreign financing.
“We do not expect a sharper depreciation in the rupee given our expectation for support from international partners, such as the Global-20 countries, which will boost Pakistan’s FX (foreign exchange) reserve base and ease external financing pressures,” it said.
Rupee depreciation is also seen as a stimulus to keep up foreign exchange reserves as it boosts export competitiveness and discourages imports.
In Pakistan’s case, rupee devaluation could not help in increasing exports. However, it brought down imports. Exports declined 6.8 percent to $21.3 billion during the last fiscal year, whereas imports sharply fell 18.6 percent to $44.5 billion.
“Policymakers (in Pakistan) will likely allow for some depreciation, given lower oil prices should cap inflationary pressures,” Fitch Solutions said.
According to Daily Forex, the USD/PKR has endured rough trading the past five days, but its range should not be a surprise to anyone. Speculators seeking to trade the Pakistani Rupee via forex platforms are looking at the USD/PKR as an opportunity to make a short term profit, the forex pair is not exactly an airtight investment in the long haul.
The resistance level for the USD/PKR in the short term appears to be 167.5 and this appears to look enticing because the past few days of trading have seen support levels strengthen, it added.
Gold prices up Rs. 1,600
Gold rates in the local market rose by Rs. 1,600 to Rs. 111,250 per tola as it extended gains to a fourth straight session. The price of 24 Karat-Gold jumped by Rs. 1,600 to Rs 111,250 per tola in the local market. The valuable yellow metal had closed at Rs 109,650 per tola on the previous trading day.
According to the data released by Karachi Sarafa Association, the price of 10-gram gold also gained by Rs. 1371 to settle at Rs. 95,378 against Rs. 94,007 on the last trading day.
In the international market, gold prices touched $1,813 an ounce, up by only $7 while silver was pegged at $19.50 per ounce.