Rupee Loses Big Against US Dollar As Political and Economic Risks Rattle Markets

The Pakistani Rupee (PKR) dropped further against the US Dollar (USD) and posted losses during intraday trade today.

It depreciated by 0.40 percent against the USD and closed at Rs. 219.86 after losing 88 paisas in the interbank market today. The local unit quoted an intra-day low of Rs. 220.98 against the USD during today’s open market session.

The local unit was stable in the morning against the greenback and traded as high as 218.25 level in the open market at 11:03 AM. By midday, the greenback went as high as 220.54 against the rupee. After 2 PM, the local unit continued to trade at the 219-220 level against the top foreign currency before the interbank close.

The rupee reported losses against the dollar today second day in a row as markets continued to struggle despite the International Monetary Fund’s (IMF) $1.1 billion loan disbursal last week.

Money changers had another dull close today despite news that Moody’s Investors Service rated the IMF’s loan disbursement and program revival as a “credit positive” for Pakistan. The top rating agency expects Pakistan to be able to fully meet its financing needs for fiscal 2023 and the next few years, based on the assumption that the South Asian nation maintains engagement with the IMF over the remaining period of the EFF and steadfastly implements structural reforms to support sustainable growth.

Moody’s noted that political risk remains high, which will challenge the stability and predictability of policymaking. “Social risks are also heightened”, and the ongoing floods would add to inflationary pressures in the country, while imports would also rise, the agency added. “Damage to crops and infrastructure threatens fiscal slippage and complicates Pakistan’s ability to enact tax reforms and tighten spending,” it further said.

The rupee’s movement in the open market drew attention once more, as the spread with interbank rates eased up before sharply going south. Experts forecast that the rupee will face some pressure as Pakistan seeks to import more essential commodities in the aftermath of the country’s floods.

Globally, oil prices rose more than $2 a barrel on Monday, soaring as investors expected possible moves by OPEC+ producers to slash output and support prices at a meeting later in the day.

Brent crude was up by 2.73 percent at $95.56 per barrel, while the US West Texas Intermediate (WTI) went up by 2.50 percent to settle at $89.04 per barrel. It is pertinent to note that US markets are closed for a public holiday today.

Oil prices have fallen from multi-year highs reached in March, pressured by fears that interest rate hikes and COVID-19 curbs in parts of China will slow global economic growth and dent oil demand.

The PKR was positive against some of the other major currencies in the interbank market today. It gained 95 paisas against the Euro (EUR), and Rs. 1.00 against the Pound Sterling (GBP).

Conversely, it lost five paisas against the Australian Dollar (AUD), 23 paisas against the Saudi Riyal (SAR), 24 paisas against the UAE Dirham (AED), and 25 paisas against the Canadian Dollar (CAD) in today’s interbank currency market.