After three successive gains, Pakistan’s rupee was back to being under pressure, depreciating 0.23% against the US dollar in the inter-bank market on Thursday.
As per the State Bank of Pakistan (SBP), the rupee closed at 185.87 after a day-on-day depreciation of 42 paisas, or 0.23%. On Wednesday, the rupee had closed at 185.45 after an appreciation of 0.09%.
Oil prices, a major determinant of currency parity, firmed slightly but were trading in and out of positive territory as investors weighed up tightening Russian supplies and the prospect of dwindling fuel demand in China.
Zafar Paracha, General Secretary at the Exchange Companies Association of Pakistan (ECAP), said the reversal comes amid a lack of positive developments on the economic front.
“Pakistan’s talks with the International Monetary Fund (IMF) regarding the next tranche remain unclear. Additionally, the market now expects a rate-hike in the upcoming Monetary Policy Committee announcement of the State Bank of Pakistan.”
Rupee posts marginal gain against US dollar
“The recent spike in T-bill rates does not bode well for the currency as well.”
In its report, AKD Securities also highlighted that the expected resumption of the IMF programme would provide much-needed clarity, and this should bring stability to the exchange rate.
“From an inflation perspective, the stability in the exchange rate should ease inflationary pressures but at a lag where upcoming inflationary releases could remain elevated inhibiting sharp currency devaluation in 1QCY22. To highlight, every 1% currency change contributes 10bps to inflation over a period of 4M as per studies,” stated the report.