Rupee Drops 4th Day in a Row Against US Dollar After S&P Ratings Downgrade

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

It depreciated by 0.09 percent and closed at Rs. 225.64 after losing 21 paisas. It quoted an intraday low of 226.435 against the greenback before close.

The local unit was all red against the greenback fourth day in a row and opened trade in the 226 range in the open market. By midday, the greenback moved lower against the rupee. After 1 PM, the local unit dropped and stayed on the 226 level against the top foreign currency before going back to the 225 level at the interbank close.

The rupee reported losses against the US Dollar today with informal rates hovering above 250. Today’s drop comes after global ratings agency S&P Global lowered its long-term sovereign credit rating on Pakistan to ‘CCC+’ from ‘B-‘, and the short-term rating to ‘C’ from ‘B’ on enduring external, economic, and fiscal risks.

The rating agency stated that Pakistan’s already low foreign exchange reserves will remain under pressure throughout 2023, barring a material decline in oil prices or a step-up in foreign assistance.

A series of shocks — severe floods, surging food and energy inflation, and rising global interest rates — will lead to weaker economic and fiscal outcomes, and refinancing challenges over the medium term. Pakistan also faces elevated political risks, which may affect its policy trajectory over the next 12 months, the report said. The agency maintained its outlook at stable.

Globally, oil prices rose 2 percent on assumptions of a decrease in Russian crude supply, which helped offset concerns about a hit to US transport fuel demand growth as an Arctic storm threatens travel during the holiday season.

At 4:15 PM, Brent crude was up by $1.30 or 1.61 percent to reach $82.28 per barrel, while the US West Texas Intermediate (WTI) was also green at $78.94 per barrel.

International media reported today that Russia’s Baltic oil exports could fall by 20 percent in December compared to the previous month after the European Union and G7 nations imposed sanctions and a price cap on Russian crude beginning on December 5. In response to price caps, Russia may reduce oil output by 5-7 percent in early 2023.

Meanwhile, in a few prominent trading circles, there is an understanding that China, being the oil market’s biggest wildcard, may help by resuming all businesses and eventually lead to increased demand.

The PKR was bearish against some of the other major currencies in the interbank market today. It lost five paisas against the UAE Dirham (AED) and six paisas against the Saudi Riyal (SAR).

Conversely, it gained six paisas against the Euro (EUR), 33 paisas against the Canadian Dollar (CAD), 79 paisas against the Pound Sterling (GBP), and Rs. 1.32 against the Australian Dollar (AUD) in today’s interbank currency market.