Pakistan’s rupee registered a significant decline against the US dollar in its first trading session after the Eid break, as the currency closed below the 210 level in the inter-bank market on Thursday.

As per the State Bank of Pakistan (SBP), the currency settled at 210.10, a depreciation of Rs2.19 or 1.04%, against the greenback.

In its previous session on Thursday, the local currency had closed at 207.91 after an appreciation of eight paisas or 0.04%.

During a shortened previous week, the rupee fell nearly 1.5% against the US dollar in the inter-bank market, as renewed uncertainty over the International Monetary Fund (IMF) programme disrupted the currency’s upward ride.

Pakistan’s foreign exchange reserves also took a hit, putting the rupee under further pressure, while the central bank announced increasing the key interest rate by 125 basis points, taking it to 15%.

Meanwhile, oil prices, a key determinant of currency parity, edged up on Wednesday, a day after prices fell through $100 a barrel for the first time since April, but gains were limited by caution ahead of US inflation data that could weaken the market.

Brent crude futures were up 45 cents, or 0.5%, at $99.97 a barrel, while US West Texas Intermediate crude gained 44 cents, or 0.5%, to $95.27.

The decline in local currency value comes as experts have said that rupee is likely to remain under pressure until resumption of the IMF programme.

“The depreciation was expected post-Eid holidays,” Samiullah Tariq, Head of Research at Pak Kuwait Investment Company Limited, told Business Recorder.

“As markets were closed due to Eid holidays, there were no export LCs available to counter the import payments, which put pressure on the local currency.

“Remittance inflows post a decline after Eid as well, while the dollar is also gaining strength against other currencies as well.”

Tariq added that revival of the IMF programme would bring some relief to the currency market.

Last week, former finance minister Shaukat Tarin had said speculators were driving the rate of dollar upwards, and the greenback should not be more than Rs185 based on Pakistan’s real effective exchange rate (REER), which is the value of a country’s currency against a basket of currencies of global trading partners.

“While exporters are the main speculators, the role of exchange companies and banks cannot be ruled out,” he had said while talking to media persons.

The story was originally published in Business Recorder on July 13, 2022.