KARACHI: Rupee slipped 0.13 percent (-23 paisas) against the US dollar last week despite recent inflows from the International Monetary Fund.
The rupee slipped from 174.48 to 174.71 against the American currency in the interbank market last week after registering a strong recovery in the preceding week. The local unit has appreciated by Rs1.80 during the current year 2022 while it has devalued by Rs17.28 during the ongoing fiscal year 2021-22.
On the other hand, inflation in the US climbed to its highest level in 40 years in January, with prices rising by 7.5pc from a year ago. The Federal Reserve has signalled that it intends to raise interest rates by 50bps at its meeting in March in an effort to dampen spending and bring down prices. This has supported the dollar index to climb 0.28 percent up at 95.85.
Moreover, surging crude oil and commodity prices globally amid Russia-Ukraine tension, which have rattled the financial and equity markets across the globe, may also keep the rupee under pressure.
The rupee started last week on strong footing and remained almost firm on the first two days. It appreciated by one paisa on Monday and depreciated by three paisas on Tuesday.
The local currency came under pressure on Wednesday and shed 39 paisas (-0.22 percent). The lowest level of the rupee against the dollar during the week under review was recorded at 174.89 on Wednesday.
However, the rupee remained firm for the next two days and gained two paisas on Thursday and 16 paisas on Friday, which eroded most of the losses of the week.
The rupee’s depreciation, albeit marginal, was against the market’s expectation after receiving $1 billion each recently from the International Monetary Fund (IMF) and international sukuk. The net reserves with the State Bank of Pakistan (SBP) have surged to $17.34 billion; however, they are still below the December 2021 level of $17.69 billion due to higher imports.
The experts said that besides massive trade deficit on the local front, the elevated demand for dollars from Afghanistan, which is still untraceable by regulators, has stalled rupee to realise its true valuation in the interbank market.
On the other hand, remittances from overseas workers declined by 14.9 percent on a month-on-month (MoM) basis in January 2022, amounting to $2.14 billion. The SBP said that workers’ remittances remained above $2 billion for the 20th consecutive month. However, these have been the lowest monthly remittance figures since August 2020.
The support provided through inflows from overseas Pakistanis as well as investments through Roshan Digital Account and measures taken by the central bank in recent months to improve the transparency in the foreign exchange market may help improve market confidence.
