As per the State Bank of Pakistan (SBP), the rupee closed at 178.13 after a day-on-day appreciation of 63 paisas or 0.35%. This is the second-lowest closing level of the rupee in the inter-bank. Last year on December 29, the PKR closed at 178.24 against the USD, which remains its lowest closing level.

During the previous week, the rupee remained range-bound, staying in the 177 level with a cumulative fall of 0.22%.

The latest depreciation comes as oil prices soared more than 9% on Monday, touching their highest since 2008, as the United States and European allies mull a Russian oil import ban and delays in the potential return of Iranian crude to global markets fuelled tight supply fears.

Brent crude futures jumped $12.61, or 10.6%, to $130.72 a barrel, while US West Texas Intermediate (WTI) crude climbed $10.41, or 9%, to $126.09 earlier in the day.

“The hike in oil prices, which have climbed above $130 per barrel, is playing on the minds of investors,” Saad Khan, Head of Research at IGI Securities, told Business Recorder.

He added that rising oil prices will have a detrimental impact on the balance of payments, as the import bill would shoot. “Until the situation on the external front improves, rupee would remain under pressure,” he said.

Talking about the upcoming Monetary Policy Committee (MPC) of the central bank meeting on Tuesday, Khan said market forces anticipate the policy rate will remain unchanged.

“However, the status quo is bad for Pak rupee, and would push the currency towards the 179-180 level,” he said, adding that a 50-75 bps hike in policy rate would cushion the rupee decline.

“We expect the central bank would continue with its pro-growth strategy, and will not hike rates despite the commodity price surge."

This story was originally published in Business Recorder on March 07, 2022.