Rupee Falls Sharply Against Major Currencies As Economic Woes Intensify

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

It depreciated by 0.70 percent against the USD and closed at Rs. 221.42 after losing Rs. 1.56 in the interbank market today. The local unit quoted an intra-day low of Rs. 222.50 against the USD during today’s open market session.

The local unit was bearish in the morning against the greenback and traded as high as 219.25 level in the open market at 10:32 AM. By midday, the greenback went as low as 220.75 against the rupee. After 2 PM, the local unit continued to trade at the 220-223 level against the top foreign currency before the interbank close.

The rupee reported losses against the dollar today third day in a row as markets continued to struggle with another greenback drought in the open market as a result of the suspension of duties and taxes on vegetable imports, as well as an increase in smuggling, piled the pressure on currency markets.

Moreover, Pakistan’s dollar bonds fell to their lowest level in more than a month as the economy struggles to recover from devastating floods, putting pressure on the government’s fiscal health. Subsequently, the government has cut its fiscal year growth forecast for this fiscal year to 2.3 percent from 5 percent in June, citing floods that inundated a third of the country to have exacerbated the country’s economic crisis.

The local unit also failed to respond to today’s massive shift in oil prices, a key determinant of currency parity, which slid on Tuesday after a two-day rally.

Rupee Takes One On The Chin As US Dollar Runs Riot Globally

The USD has been a good run of form this year. It has surpassed parity with the euro for the first time in 20 years, reached its highest level against the British pound since 1985, and dented the Japanese yen, which was trading at 140.42 to the dollar on Monday, its lowest level since August 1998. According to Deutsche Bank analysts, the dollar was second only to natural gas in terms of best-performing assets last month.

Few observers expect a long-term decline to occur anytime soon. Investors and analysts said the Federal Reserve will continue to raise interest rates aggressively in order to keep inflation under control. This policy has been a key driver of the dollar’s gains, with higher interest rates attracting capital from economies where rates are still low.

For the United States, the strength of the dollar lowers the cost of imports while raising the cost of US goods for international consumers. This can harm exporters and drive up the storm of international inflation, and Pakistan is caught right in the eye of it.

Oil Drops Again

Globally, oil crashed on Tuesday after a two-day rally as fears returned about weaker demand and the possiblity of more interest rate hikes, trumping assurances from OPEC+’s first output target cut since 2020.

Brent crude was down by 3.09 percent at $92.78 per barrel, while the US West Texas Intermediate (WTI) went down by 0.51 percent to settle at $86.43 per barrel. The OPEC+ news has now entered the market, and the focus has temporarily shifted to economic and inflationary concerns, the two most important of which are China’s extended COVID lockdowns and Thursday’s ECB rate decision.

Oil nearly reached an all-time high of $147 per barrel in March, as Russia’s invasion of Ukraine exacerbated supply concerns. Concerns about a Western recession, soaring inflation, and interest rate hikes have since weighed.

Other Currencies

The PKR was negative against all of the other major currencies in the interbank market today. It lost Rs. 3.04 against the Euro (EUR), and Rs. 4.29 against the Pound Sterling (GBP).

Moreover, it lost 42 paisas against the Saudi Riyal (SAR), 42 paisas against the UAE Dirham (AED), 1.41 against the Australian Dollar (AUD), and Rs. 2.07 against the Canadian Dollar (CAD) in today’s interbank currency market.