Rupee Loses Big Against GBP, EUR, USD As Default Fears Spoil ADB News

The Pakistani Rupee (PKR) reversed its 3-day winning streak against the US Dollar (USD) and posted losses during intraday trade today.

It depreciated by 0.43 percent and closed at Rs. 220.68 after losing 95 paisas against the greenback. The local unit quoted an intraday low of 221.025 against the greenback.

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The local unit was bearish in the morning against the greenback and resumed trade at 219 in the open market. By 10:15 AM, the greenback went as low as 218.95 against the rupee. By midday, the greenback went as high as 221.025 against the rupee. After 1 PM, the local unit stayed bearish and stayed on the 220 level against the top foreign currency before the interbank close.

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The rupee reversed gains against the US dollar despite news that the Asian Development Bank (ADB) had officially released $1.5 billion in financing under the Building Resilience Active Countercyclical Expenditures (BRACE) Program to help Pakistan.

Experts have said the line is still very thin when it comes to forex stability and policymaking, and currency markets aren’t immune to even the slightest of concerns.

Pakistan’s default risk entered alarming new levels on Monday when the cost of ‘insuring’ its sovereign debt widened to the highest level in 13 years, following the recent junk classification of Pakistan’s bonds by Moody’s and Fitch Ratings.

Independent economic analyst A H H Soomro told ProPakistani,

We’re at the edge in terms of FX reserves and the coming pipeline too is neck to neck in terms of debt payments and rollover. Also, govt should aim to build FX reserves by buying from market gradually as imports have nearly ebbed. Unfortunately, we’d have to fund Afghanistan dollar availability so serious curbs are needed to ensure no smuggling and actions must be taken to control the plug. Until dollar funding resumes from IMF and commodities crash, we should hope to maintain current interbank rate. Structurally, the only way out is exports. That is not seemingly a major priority for government until elections.

On Monday-Tuesday, the market nearly ran out of US dollars, with transactions taking place only on special requests as some currency dealers struggled to ensure availability at a time when the rupee had only started recovering last week’s losses.

Globally, oil prices soared by more than $1 per barrel on Wednesday, moving in and out of negative territory after industry data showed that US crude stockpiles rose more than expected last week, despite supply concerns and a weaker dollar.

Brent crude was up by 0.1 percent at $93.61 per barrel, while the US West Texas Intermediate (WTI) surged by 0.38 percent to settle at $85.64 per barrel.

Rising stockpiles exacerbate fears of a global recession, which would further reduce demand, a weakness reflected in softer Chinese crude import data. However, ongoing supply constraints, highlighted by the International Energy Agency’s head as the “first truly global energy crisis,” provided a floor for prices.

According to Reuters, the CEO of Saudi Aramco said there were many uncertainties ahead of planned European embargoes on Russian crude and refined products, a member of the OPEC+ alliance led by Saudi Arabia, but that Russian oil still found buyers.