Rupee likely to suffer losses in coming week as global commodity prices soar

• Rupee closes at Rs178.51 at end of trading week, shedding one rupee against dollar.
• Currency dealers say Russia-Ukraine conflict led global crisis caused commodity prices surge.
• Say despite a slip, rocketing crude oil prices remained high enough to cause a surge in Pakistan's petroleum import bill.

KARACHI: Rupee may take a hit from the soaring global commodity prices, remaining under pressure against the US dollar in the coming week, The News reported citing currency dealers.

Compared to last week's closing level of Rs178.50, the local currency shed one rupee against the dollar at the end of the trading week as it closed at Rs178.51 on Friday.

The currency dealers reminded that Pakistan is highly depended on the import of global commodities like oil, gas, coal and palm oil for domestic needs but the Russia-Ukraine conflict led global crisis has caused the surge in prices of the commodities, especially of those stated.

They said that the crude oil prices rocketed to $139 per barrel during the last week and despite a slip, remained high enough to cause a surge in Pakistan's petroleum import bill.

Dealers further stated that the international scenario in view of Russia-Ukraine conflict has impacted global economics, and Pakistan was no exception due to its reliance on imported energy and food products.

International efforts to mediate for normalisation of the situation between Russia and Ukraine was eagerly awaited by countries, including Pakistan, and all depended on how the events turn in the coming week, dealers said.

During the past week, various currencies shed value against the dollar, they said, adding that the Pakistani rupee did see depreciation, but did not lose too much of its value.

Speaking of talks between Pakistan and the International Monetary Fund (IMF), where reservations were shown against the prime minister’s relief package for power and oil consumers as well as for industry, dealers said, “The outcome of the talks between Pakistan and IMF will also determine the course of Pakistani rupee against the dollar in the next week.”

The state bank’s decision to keep the policy rate unchanged speaks about the economic fundamentals being under the control of the economic managers of the country, which was a positive sign for the rupee, they added.

SBP said that despite the rise in global prices, the February trade deficit witnessed a further 10 per cent contraction on a month-on-month basis on top of the 29 per cent decline recorded in January, confirming the slowdown in domestic demand.

While the current account deficit rose in January, this reflected lumpy imports of oil, vaccines and other items financed through loans and supplier credit.

Dealers said that the future outlook of the local currency largely depends on future trends of commodities in the international market.

If prices do not stabilise, Pakistan would be spending more on the imports of energy and palm oil, resultantly putting pressure on the local currency.