KARACHI : Pakistani currency bounced back 1.11% (or Rs2.63) to close at Rs237.03 against the US dollar in inter-bank market on Monday, making the first major recovery in the past one and a half month ahead of the return of former finance minister Ishaq Dar from self-exile to Pakistan.
Simultaneously, the slump in international oil prices to below $80 per barrel, compared to $116 in June 2022, helped the rupee make the much-awaited recovery.
The oil price plunge may significantly reduce Pakistan’s import bill as the country heavily relies on imported energy to meet demand.
Earlier, the domestic currency resisted a fresh fall below the all-time low of nearly Rs240 for most of the last week. It made a token recovery of 0.03% (or Rs0.06) to Rs239.65 on Friday, breaking a downward streak of the past 15 consecutive working days.
The currency lost almost 12% (or Rs25) in the 15 working days to Rs239.71 against the US dollar, just Rs0.23 shy of the all-time low of Rs239.94 hit on July 28, 2022.
The major recovery of the rupee took some shine off gold as the precious metal’s price fell by a notable Rs6,500 to Rs143,300 per tola (11.66 grams) on Monday.
“The rupee’s recovery seems short-lived considering the weak economic fundamentals,” independent economist Saad Hashemy said ;
According to Hashemy, the factors impacting the rupee include the US dollar’s continued strengthening against other global currencies, Pakistan’s high debt obligations, expected increase in dollar demand when administrative import controls are eased and weak Real Effective Exchange Rate (REER)
The value of rupee against a basket of trading partners’ currencies – as it is hovering close to 100 points. If REER rises beyond 100, it will make imports cheaper and exports expensive. “This will lead to the deterioration of balance of trade while authorities are working to improve it as well as the current account deficit,” he said.
Secondly, the dollar’s strengthening in the wake of a hike in the US interest rate will not let the rupee sustain the uptrend. “Global currencies including the pound sterling and euro have dived versus the dollar. How can the rupee sustain the gains?” Hashemy asked.
