Rupee Falls Against US Dollar As Default Scare Erases Gains

The Pakistani Rupee (PKR) was all red against the US Dollar (USD) and posted losses during intraday trade today.

It depreciated by 0.10 percent and closed at Rs. 223.91 after losing 22 paisas against the greenback. It quoted an intraday low of 224.675 against the greenback before close.

The local unit was initially stable in the morning against the greenback and opened trade at 224. in the open market. By midday, the greenback moved higher against the rupee. After 1 PM, the local unit was bearish and stayed on the upper 223 level against the top foreign currency before stabilizing at the interbank close.

The rupee reported losses against the US Dollar today after fears of default eroded earlier gains. Money changers view today’s drop as a warning signal for the government which has already failed to ensure excess loan debt financing coverage after paying off a substantial $1 billion Sukuk on Friday.

At the same time, many analysts believe that higher rates offered in illegal markets are encouraging remittances to be sent via informal channels, which isn’t helping the country’s forex reserves offering an already depleted cover of barely a month.

Globally, oil prices rose on Monday as OPEC+ nations maintained their output targets ahead of a European Union ban and a G7 price cap on Russian crude. At the same time, more Chinese cities relaxed COVID-19 curbs over the weekend, a positive sign for fuel demand in the world’s top oil importer.

At 4:50 PM, Brent crude surged by $1.84 or 2.15 percent to reach $87.41 per barrel, while the US West Texas Intermediate (WTI) was up at $81.80 per barrel.

While prices went up as much as 2 percent earlier in the day, both the Brent and WTI contracts have since pared some of their gains. The market is still awaiting policy on Europe’s cap on Russian crude at $60 per barrel.

The PKR was bearish against most of the other major currencies in the interbank market today. It lost five paisas against the Saudi Riyal (SAR), six paisas against the UAE Dirham (AED), 16 paisas against the Canadian Dollar (CAD), 52 paisas against the Euro (EUR), and 91 paisas against the Pound Sterling (GBP).

Conversely, it gained 36 paisas against the Australian Dollar (AUD) in today’s interbank currency market.