Pakistan's rupee fell further against the US dollar, recording a depreciation of 0.2% in the inter-bank market on Monday as escalating geopolitical tension took a toll on currencies worldwide.
As per the State Bank of Pakistan (SBP), the rupee closed at 177.47 after a day-on-day depreciation of 36 paisas or 0.2%. On Friday, the local currency had also depreciated 72 paisas against the dollar.
Overall, the rupee ended 0.14% lower during the previous week, but endured a volatile ride as escalation in the conflict between Russia and Ukraine, skyrocketing oil prices in the international market, and a record-high current account deficit in January took a toll on market sentiment.
Since May 2021, the rupee has shed nearly 14% of its value against the US dollar.
Oil prices, a major determinant of the exchange-rate parity, continued to jump on escalating sanctions against Russia over its invasion of Ukraine, which in turn led President Vladimir Putin to put his country's nuclear deterrent on high alert.
On Monday, Brent crude futures were up $3.95, or 4%, at $101.88, after hitting a high of $105.07 a barrel in early trade.
US West Texas Intermediate (WTI) crude futures were up $4.55, or 5%, at $96.14 a barrel, after hitting a high of $99.10 early in the day.
Rising oil prices has become a headache for economic managers in Pakistan, as it increases the import bill, adding pressure on the already widening current account deficit.
The CAD for the month of January stood at $2.6 billion, which is the highest ever recorded number.
“PKR continued to depreciate owing to highest ever reported CAD during Jan-22 and concerns over increasing trade bill on the back of increasing oil prices,” Abdullah Umer, research analyst at Ismail Iqbal Securities Limited, told Business Recorder.
The analyst added that the ongoing tension at the geopolitical front, especially with regards to Russia-Ukraine, will impact oil prices, adding to Pakistan's economic woes.
“Recently, EU countries that earlier opposed UK government's proposal to expel Russia from SWIFT payment system are now considering it. This may result in a further rally in oil prices. All these reasons will continue to put pressure on the rupee,” said Umer.
The story was first published in Business Recorder on February 28, 2022.
