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Rupee hits another historic low against dollar


KARACHI:

The pressure on the rupee kept on mounting as it fell Rs0.16 to close at a new all-time low of 170.96 against the US dollar in the inter-bank market on Wednesday owing to 100% increase in trade deficit in the first quarter of current fiscal year.

According to the State Bank of Pakistan (SBP), the local currency had closed at Rs170.8 against the greenback on Tuesday.

The rupee has depreciated 12.3% since touching recent high of Rs152.28 on May 14, 2021 and 7.6% since the start of ongoing fiscal year on July 1, 2021.

Speaking to The Express Tribune, Arif Habib Commodities Managing Director and CEO Ahsan Mehanti said that the latest rupee fall reflected the impact of a twofold increase in trade deficit of Pakistan in July-September 2021 on a year-on-year basis.

“Swelling import payments are enhancing demand for the US dollar,” he said and projected that the rupee would remain under pressure until the receipt of next loan tranche from the International Monetary Fund.

AA Gold Commodities Director Adnan Agar said that the decline in rupee value came in the wake of a widening current account deficit.

“Rupee is on a downward trajectory in foreign exchange market and the latest drop is just the continuation of the trend,” he said. “Pakistan’s imports are rising and the growth in remittances and exports is unable to match the pace.”

Read Fitch sees US dollar to reach Rs180 in 2022

He was of the view that the tumultuous situation in Afghanistan coupled with uncertainty about Pakistan-US relations was affecting the rupee value.

A senior analyst at a leading research house echoed similar views, saying that the rupee was under pressure owing to the widening of trade deficit.

“Imports during September came in at $6.5 billion, which translates into $75 billion per year,” he pointed out while expressing concern. “Moreover, the rupee is also falling because of a surge in commodity prices in the international market.”

He recalled that Finance Minister Shaukat Tarin had stated recently that $15 million was going to Afghanistan from Pakistan every day.

The analyst pointed out that economic conditions and market sentiment were jointly impacting the direction of the rupee. He, however, voiced a firm hope that any improvement in the geopolitical situation would support the currency’s recovery.

“The government is taking measures to enhance exports and curb imports,” the analyst said.

Published in The Express Tribune, October 7th, 2021.

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