At the time of this report, the dollar was being traded at Rs202.31, registering a decline of Rs1.54.

On Thursday, the rupee had gained 75 paisa to close at 200.77 on the back of improved spirits over revival of the International Monetary Fund (IMF) programme and hope of receipt of $2.4 billion from China.

The fall on Friday comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves continued to decline and fell sharply by $497 million during the last week.

“A significant decline in foreign exchange reserves created a negative sentiment in the market,” Abdullah Umer, Analyst at Ismail Iqbal Securities, told Business Recorder.

According to recent data, SBP forex reserves stood at $9.226 billion during the week as of Jun 3, 2022 compared to $9.722 billion on May 27, 2022. The decline in SBP reserves is due to external debt repayment. During the period under review, reserves held by the commercial banks fell $98 million to reach below $6 billion mark.

Umer said a spike in oil prices has also added to import bill concerns: “No respite seems ahead pertaining to oil prices which are hovering at $122-123 per barrel.”

He added that the increase in margin requirement from exporters for letters of credit has also created pressure on rupee, adding to the demand for dollars as well.

Umer said that the upcoming budget is expected to be contractionary in nature, and would not have much impact on the currency market.

This is an intra-day update

The story was originally published in Business Recorder on June 10, 2022.