Rupee Slides 7th Day in a Row As Default Gossip, FATF and Oil Jump Rattle Market

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

It depreciated by 0.03 percent and closed at Rs. 220.95 after losing seven paisas against the greenback. The local unit quoted an intraday low of 221 against the greenback.

The local unit was bearish in the morning against the greenback and resumed trade at 220.50 in the open market. By 10:15 AM, the greenback went as low as 220.75 against the rupee. By midday, the greenback went as high as 220.98 against the rupee. After 1 PM, the local unit slid further and stayed at the 220-221 level against the top foreign currency before the interbank close.

The rupee reported losses for the seventh consecutive day today. Its drop is being caused by dwindling reserves, and uncertainty about inflow commitments with Finance Minister Ishaq Dar struggling to play his game.

Money changers cited today’s marginal drop to zero influence of Dar’s assurances as market sentiments go bearish in expectations of more economic hardships as winter approaches.

In terms of broader expectations, fears of imminent default impacted the exchange rate. Pakistan’s internationally traded maturities have received a lot of spat from investors who’re reluctant to funnel money into an economy with no plan in place for a revival. JP Morgan says the country’s bonds have plunged to around 33-35 cents on the dollar this month which leaves them broadly in line with other countries seen as at risk of default such as El Salvador, Ghana, and Ecuador.

On the flip, Pakistan awaits the results of the Financial Action Task Force’s (FATF) two-day plenary session that begins today in Paris, France. Minister of State for Foreign Affairs Hina Rabbani Khar and her cohort are already in the French capital to oversee deliberations on the subject of Pakistan’s removal from the anti-money laundering watchdog’s increased monitoring list or grey list.

Globally, oil prices soared around $1 on Thursday as investor sentiment improved following news that China is considering shortening the quarantine period for inbound visitors.

Brent crude was up by 1.48 percent at $93.78 down per barrel, while the US West Texas Intermediate (WTI) rose by 1.67 percent to settle at $86.98 per barrel.

A looming European Union ban on Russian crude and oil products, as well as output cuts from the Organization of the Petroleum Exporting Countries and other producers, including Russia, have boosted oil prices. If implemented, the sanctions on Russian crude are likely to dominate the oil market in the coming weeks. Because of supply disruptions caused by EU sanctions, brent oil futures are expected to average $100 per barrel in Q4 2022.

The PKR fell further against some of the other major currencies in the interbank market today. It held out against the Saudi Riyal (SAR), lost one paisa against the Canadian Dollar (CAD), and two paisas against the UAE Dirham (AED).

Conversely, it gained 68 paisas against the Australian Dollar (AUD), Rs. 1.05 against the Euro (EUR), and Rs. 1.61 against the Pound Sterling (GBP) in today’s interbank currency market.