Rupee Loses 3rd Day in a Row Against US Dollar As Default Fears Rattle Market

The Pakistani Rupee (PKR) continued to lose ground against the US Dollar (USD) and posted losses during intraday trade today.

It depreciated by 0.10 percent and closed at Rs. 221.91 after losing four paisas against the greenback. The local unit quoted an intraday low of 222 against the greenback.

The local unit was all red in the morning against the greenback and resumed trade at 221.9 in the open market. By midday, the greenback moved marginally higher against the rupee. After 1 PM, the local unit was red and stayed on the 221-222 level against the top foreign currency before the interbank close.

The rupee reported losses for the third consecutive day against US Dollar today after markets reacted to news that Pakistan’s default risk had entered alarming new levels this week.

Last month, Fitch downgraded Pakistan’s long-term issuer default rating to CCC+ from B-, while Moody’s downgraded the country’s issuer and senior unsecured debt ratings to Caa1 from B3. Yields have spiraled down ever since and will only get worse if there’s no strategy in place to win back investor confidence.

The country’s ongoing problems are compounded by recent floods estimated to cost over $30 billion in damages, and the spiraling uncertainty in its external liquidity conditions isn’t helping.

Money changers view last week’s massive drop in reserves as a prevalent factor behind this week’s slump, including the rising political uncertainty that made dollar holders reluctant to sell their greenbacks.

Globally, oil prices fell by more than $1 per barrel as rising COVID-19 cases in China fueled concerns about lower fuel consumption in the world’s top crude importer.

At 4:10 PM, Brent crude was down by 1.25 percent at $91.98 per barrel, while the US West Texas Intermediate (WTI) was down by 1.63 percent to settle at $84.47 per barrel. Both benchmarks dropped by over $1 today. Crude oil stocks in the United States are expected to have fallen by about 300,000 barrels in the week ending November 11, according to a Reuters poll released on Monday.

Concerns about a lack of supplies this winter have kept oil prices high. On December 5, the European Union will impose a ban on Russian oil. Following the ban, imports of oil products will be halted in February.

The PKR was bearish against the other major currencies in the interbank market today. It lost 14 paisas against the Canadian Dollar (CAD), 62 paisas against the Pound Sterling (GBP), Rs. 1.28 against the Australian Dollar (AUD), and Rs. 1.54 against the Euro (EUR).

Moreover, it lost six paisas against the Saudi Riyal (SAR) and six paisas against the UAE Dirham (AED) in today’s interbank currency market.