Pakistan's rupee weakened further against the US dollar, depreciating 0.13% in the inter-bank market on Tuesday.
As per the State Bank of Pakistan (SBP), the rupee closed at 176.72 after a day-on-day depreciation of 23 paisas or 0.13%. The fall comes after the rupee depreciated 0.14% against the US dollar on Monday as well.
“The import quantity is higher than exports, leading to an outflow of dollars,” Samiullah Tariq, Head of Research and Development at Pakistan Kuwait Investment Company Limited, told Business Recorder.
Tariq said effect on the import payment takes one month, adding that pressure on the currency due to higher oil prices would persist.
Rupee loses ground against US dollar, falls 0.14%
The latest fall comes as oil prices continued to inch up on Tuesday, recovering some of the previous day's losses, as growing tension in Eastern Europe and the Middle East fuelled concerns over possible supply disruptions.
Brent crude futures rose 61 cents, or 0.7%, to $86.88 a barrel after touching a session high of $87.27 a barrel earlier, reversing a 1.8% fall in the previous session. U.S. West Texas Intermediate (WTI) crude futures climbed 44 cents, or 0.5%, to $83.75 a barrel, having slid 2.2% on Monday.
Oil prices are directly related to sentiment around the currency as expensive imports contribute to deterioration in Pakistan's current account, putting pressure on the rupee.
Meanwhile, Malik Bostan, Chairman Exchange Companies Association of Pakistan (ECAP) told Business Recorder that uncertainty persists regarding revival of the International Monetary Fund (IMF) programme, as the SBP Autonomy Bill needs to be passed by the Senate.
“Geopolitical tensions, especially escalation between Russia and Ukraine, have also dented market confidence,” he said.
Meanwhile, the SBP on Monday decided to keep the policy rate unchanged at 9.75% as it expects moderation in economic growth.
Talking about the State Bank's decision, Tariq informed that the secondary market yields have also come down following the announcement. "This would be followed with a drop in KIBOR rates as well, and will have a positive impact on the investment climate," said Tariq.
