A jittery oil market kept the rupee under pressure, with the Pakistani currency enduring a volatile session to eventually end unchanged against the US dollar in the inter-bank market on Thursday.

As per the State Bank of Pakistan (SBP), the rupee closed at 178.63, reflecting no change during the session. However, the rupee did hit 179.195 during the day before closing at 178.63, which still remains the lowest closing level in the inter-bank.

Oil prices, a major determinant of currency parity, showed a significant decline early on Thursday, after UAE’s ambassador to Washington said his country will be encouraging OPEC to consider increasing its output to fill a supply gap caused by sanctions on Russia after it invaded Ukraine. However, prices rose as the market contemplated whether major producers would boost supply to help plug the gap in output.

Oil prices have surged since Russia, the world’s second-largest crude exporter, launched what it called a “special operation” in Ukraine last month.

“The drop in oil price is still not enough to reduce pressure on the rupee,” Saad Hashmey, Executive Director at BMA Capital, told Business Recorder.

On the other hand, rise in market yields is a good sign for the rupee, he said.

As per Arif Habib Limited, the SBP, in its latest treasury bills auction, managed to raise Rs951 billion against a target of Rs1,000 billion, as 3-Month cut-off yields increased by 96bps to 11.45%, 6-Month cut-off yields increased by 121bps to 12.10%, and 12-Month cut-off yields increased by 130bps to 12.30%.

This article was originally published in Business Recorder on March 10, 2022.