Rupee depreciates by Rs 1.3 against US dollar

KARACHI: Pakistan rupee, on Wednesday, continued to lose ground against the US dollar in the interbank market, falling by Rs1.3 to conclude the day’s trade around a two-week low of Rs172.93 per US dollar.

Over the previous five days, the local currency has shed roughly 1.71 percent.

Investors became skeptical of the IMF’s (IMF) program’s delay and assessed economic risks in the event that the government failed to achieve the fund’s terms.

Analysts noted that in recent sessions, dollar demand from importers remained persistently strong for settling payments, amidst worries that the next $1 billion tranche would be delayed owing to Islamabad’s uncertainty on satisfying the IMF’s severe requirements for the conclusion of the sixth review.

They noted that this fear has kept the rupee from rising, despite the fact that the Real Effective Exchange Rate (REER) shows the local currency is undervalued.

For the previous five months, the rupee has been on a downward trend. It has dropped 13.56 percent (or Rs22.66) after reaching a 22-month high of Rs152.27 in May.

The rupee has depreciated by 9.76 percent (or Rs15.39) from the beginning of the current fiscal year on July 1, 2021, according to statistics issued by the central bank.

Tahir Abbas, the Head of Research at Arif Habib Limited (AHL), stated on Tuesday that the government must act quickly since market uncertainty has begun to reign.

Abbas went on to say that the rupee’s devaluation causes inflation, which is negative for the economy since rising inflation implies the import bill would spread, boosting demand for the dollar.

“As soon as there is clarification on IMF, the marker will reverse its course,” he said.