Rising commodity prices and overall domestic political uncertainty pushed Pakistan's rupee to fall further against the US dollar, as the currency depreciated 0.23% to cross the 182 level for the first time and close at a new record low in the inter-bank on Monday.
As per the State Bank of Pakistan (SBP), the rupee closed at 182.19, its weakest level in history, after a day-on-day depreciation of 41 paisas. On Friday, the local currency dropped 0.03% to close at the then-record low of 181.78.
The rupee has lost over 16% since its most-recent high achieved in May last year. On a fiscal year to date (FYTD) basis, the local currency has depreciated over 13.5%.
During the previous week, the rupee fell 0.66%, losing value in 3 of the 4 sessions while remaining unchanged in the other, to end at a new record low of 181.78 against the US dollar in the inter-bank market.
The currency has remained under pressure even as Pakistan’s current account deficit shrunk in February, as falling foreign exchange reserves and out-of-control oil prices kept the market on edge.
Rupee loses value again, closes in on 182 against US dollar
Meanwhile, oil prices, one of the key determinants of currency parity, tumbled more than $5 on Monday as fears over weaker fuel demand in China grew after financial hub Shanghai launched a two-stage lockdown to contain a surge in COVID-19 infections.
Brent crude futures slid as low as $115.32 a barrel and were trading down $5.15, or 4.3%, at $115.50, while US West Texas Intermediate (WTI) crude futures hit a low of $108.28 a barrel, and were down $5.30, or 4.7%, at $108.60.
Expectations of a high import bill in the coming months have remained intact, however, say market experts. Additionally, rising political noise amid the opposition’s no-confidence motion against Prime Minister Imran Khan have also contributed to worsening market sentiments.
“The Ukraine and Russia crisis has pushed up commodity prices in the international markets, including oil, coal, steel and gold, which has raised concern over the rising import bill in the month of March,” Zafar Paracha, General Secretary at Exchange Companies Association of Pakistan (ECAP), told Business Recorder.
“Furthermore, the rise in domestic political noise has also irked market sentiment, leading to pressure on PKR,” he said.
Paracha said that the maturity dates for the repayments of international loans especially those from China are also around the corner, which may add pressure on the foreign exchange position.
The story was originally published in Business Recorder on March 28, 2022.
