Rupee resumes downward spiral

KARACHI: The rupee on Monday resumed its slide against the US dollar, falling around 53 paisas or 0.31% to reach Rs168.72 in the inter-bank market.

The rupee began its downward journey at the beginning of last week, reaching an all-time low of Rs169.12 by Wednesday, compared to Monday’s opening value of Rs168.09 — representing a fall of Rs1.03 in three days.

However, by the end of the week, the local currency had recovered to Rs168.1.

According to some analysts, the Pakistani rupee is expected to stay steady against the greenback during the ongoing week.

Analysts said the rupee is expected to trade within the existing range this week amid matching dollar demand and supply, while the central bank’s monetary stance will also factor in.

It is pertinent to mention that in a surprise move, the State Bank of Pakistan (SBP) on Monday hiked the benchmark policy rate by 25 basis points to 7.25% for the next two months.

In its Monetary Policy Statement (MPS), the central bank said: “The current account deficit rose to $0.8 billion in July and $1.5 billion in August, while remittances remained strong, growing by 10.4% (year-on-year) during July-August and exports also performed reasonably well (averaging $2.3 billion per month).”

“In response, the rupee depreciated by 4.1% since the last Monetary Policy Committee (MPC) meeting,” it said, adding that the MPC noted that many other currencies have also depreciated recently as expectations of tapering by the United States' Federal Reserve have been brought forward.

The statement said the MPC noted that the flexible market-based exchange rate regime has performed well since its introduction in June 2019, including through the COVID shock.

“Since its floatation, the rupee has moved in an orderly manner in both directions and has depreciated by only 4.8% to date, much less than many other emerging market currencies over the same period,” it said.

The central bank further noted that since the rupee was floated, SBP’s gross foreign exchange reserves have nearly tripled to a record $20 billion, while net international reserves have risen by nearly $16 billion between end-June 2019 and end-August 2021.