Rupee once again stumbles versus dollar as politics weighs

• Pressure persists on rupee as supplies remain short.
• Dollar demand for import payments continues unabated.
• Inflows awaited as foreign exchange reserves remain thin.

KARACHI: The Pakistani rupee Thursday went down by a few notches versus the US dollar, losing 0.05% in the interbank market as investors awaited clarity on the army chief’s appointment.

The local unit closed at 223.92 after a decline of Re0.11, the central bank data showed, compared to Wednesday’s closing rate of 223.81.

The demand for dollars continues unabated, besides, greenback supply remains short of demand.

Though the current account gap has narrowed, the exports and remittances have seen a battering. The inflows have slowed down and traders are anxiously waiting for the World Bank to send the essential relief funding.

Pakistan's current account deficit yawned $204 million or 56% to $567 million for October 2022 as compared to September's $363 million, month-on-month, while it shrank 68% year-on-year, primarily owing to a continuous slowdown in imports, remittances.

The rupee is likely to stay under pressure until the economic and political worries ease, the pledged funding starts to materialise and the talks with the International Monetary Fund on the ninth review of the loan facility resume.

The SBP believes that the country’s external financing needs should be more than fully met in FY2023, aided by rollovers by bilateral official creditors, new lending from multilateral creditors, and a combination of bond issuances, foreign direct investment, and portfolio inflows, according to analysts.

The SBP’s forex reserves should assume the upward trajectories, which stand at $8 billion as of November 11.

The dollar

The US dollar was broadly weaker on Thursday as investors, encouraged by the prospect of a slower pace of interest rate hikes from the Federal Reserve, placed bets on riskier assets.

The eagerly awaited readout of the November 1-2 Fed meeting showed officials were largely satisfied they could now move in smaller steps.

“I think now it is almost certain that we’ll see the FOMC slow its pace of tightening from December,” said Carol Kong, a currency strategist at the Commonwealth Bank of Australia (CBA).

The dollar index, which measures the greenback against six major peers, was down 0.066% at 105.830, after sliding 1% overnight.

— Additional input from Reuters