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Rupee hits fresh low of 169.97


A section of financial markets has changed its view over the rupee-dollar parity in short to long-run, anticipating the local currency would maintain its downward trend under the current cycle instead of getting stabilised at current levels amid rising import payment pressure and worsening financial crisis in Afghanistan.
The Pakistani rupee hit a fresh low of Rs169.97 against the US dollar in the inter-bank market on Tuesday, according to the central bank’s data.
Talking to The Express Tribune, JS Global Capital Head of Research Amreen Soorani said: “The rupee will gradually drop to Rs175-176 against the greenback by the end of current fiscal year.”
The research house has revised its expectations following the deepening financial crisis in Afghanistan and spike in commodity prices in international markets. The situation would increase demand for dollars in the domestic economy.
“The revised estimates suggest the average value of rupee would be around Rs171-172 for the current fiscal year,” she said.
“Earlier, we estimated the average value at Rs170 for FY22,” she added.
The rupee was losing its value against the greenback due to rising demand of US dollars in the domestic economy, while supplies remained comparatively low in the inter-bank market.
Owing to rumours that the rupee would slide to 200 against the greenback, exporters have stopped selling dollars in the inter-bank market. The situation has invited panic buying of the foreign currency by importers.
READ Rupee slide: economics vs politics
Earlier, another section of financial market experts said that the downward trend in the rupee has become unsustainable.
They were of the view that the rupee would partially regain the lost ground against the greenback and would trade in the range of Rs165-170 over the next six months.
The volatility in the rupee would come to an end with the successful conclusion of the forthcoming talks between Pakistan and the International Monetary Fund (IMF). The talks are aimed at resumption of the $6 billion IMF loan programme in early October.
With a fresh drop of Rs0.37 (or 0.22%) on Tuesday, the rupee has depreciated 7.89% (or Rs12.43) compared to a pre-opening level of Rs157.54 on July 1, 2021, according to State Bank of Pakistan’s data.
The rupee has maintained its downward trend since hitting a 22-month high of Rs152.27 against the US dollar in May 2021. Since then, the currency has lost 11.62% (or Rs17.70).
Reports suggest that smugglers were illegally moving dollars from Pakistan to Afghanistan, as the United States has blocked access of Taliban to Afghanistan’s foreign exchange reserves.
Afghanistan’s foreign exchange reserves stand at around $10 billion, which are enough for 15-month import cover for the country. Besides, international media reported that the banking system in Afghanistan was on the verge of collapse.
Moreover, commodity prices have continued to surge at global markets. Pakistan has remained a net importer of raw material and plant and machinery for industrial and agricultural sectors, energy (oil and gas) and foods (wheat, sugar and cooking oil). Thus, the demand for dollars has increased with the surge in expensive imports amid a growing economy and population.
Published in The Express Tribune, September 29th, 2021.
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