Rupee Posts Losses Against the US Dollar Over SBP’s Interest Rate Uncertainty

The Pakistani Rupee (PKR) reversed its winning streak against the US Dollar (USD) and posted losses in the interbank market today. It lost 25 paisas against the greenback after hitting an intra-day high of Rs. 176.05 against the USD during today’s open market session.

It depreciated by 0.14 percent against the USD and closed at Rs. 176.49 today after gaining 24 paisas and closing at 176.24 in the interbank market on Friday, 21 January.

The rupee reported losses against the dollar after uncertainty over the State Bank of Pakistan’s (SBP) monetary policy announcement that impacted movements across the market today. It is noteworthy that last week’s interbank close had positive growth for the local unit on account of the revised (rebased) growth forecast for Pakistan’s Gross Domestic Product (GDP) for the fiscal year 2020-21 (FY21) from 3.9 percent to 5.37 percent.

Although the central bank has decided to keep the policy rate unchanged at 9.75 percent until the next cycle, various economic indicators struggled to consolidate the trends.

Discussing the rupee’s near-term outlook earlier in the day, the former Treasury Head of Chase Manhattan Bank, Asad Rizvi, explained in a new column that rebasing increases GDP growth by modifying core data, which is a popular technique. He remarked that it is ‘merely an accounting tweak that will not help save money on a loan or increase bank lending’.

Rizvi also implored the central bank’s monetary policy committee to address all “issues and set a goal for safeguarding financial stability or take responsibility for failure”.

The PKR notably reversed its gains against some of the other major currencies and reported losses in the interbank currency market today. It lost six paisas against both the Saudi Riyal (SAR) and the UAE Dirham (AED), and 23 paisas against the Euro (EUR) in today’s interbank currency market.

Conversely, it gained 27 paisas against the Australian Dollar (AUD), 41 paisas against the Canadian Dollar (CAD), and 12 paisas against the Pound Sterling (GBP).