KARACHI
Pakistan rupee snapped five-week losing streak against the US dollar with 0.91 percent (Rs1.62) gain, eroding two-third of December losses.
Despite State Bank of Pakistan’s intervention and the general bias for a strong rupee, the currency actually weakened 10.44 percent (Rs16.68) against the dollar on a year-on-year basis, falling sharply from 159.83 (December 31, 2020) to 176.51 (December 31, 2021).
On a month-on-month basis, the domestic unit weakened marginally against the American currency by 79 paisas in December, as the dollar closed at 175.72 on November 30, 2021. The rupee set 14 lowest ever levels against the US dollar in December, though the depreciation remained slow in terms of value. All these lowest levels ranged between 176.02 and 178.24 against the greenback.
During the last week, the US dollar opened at Rs178.13 in the interbank market on Monday last and closed at Rs176.51 on Friday. Within the open market, the rupee was traded at Rs178.50-Rs180 per dollar during the week.
During the last week, the rupee set three all-time new lows against the dollar against the preceding week when the number stood at two. All the three lowest levels were set during the first three days of the week as the local unit plunged to 178.17 against the US dollar on Monday, 178.19 on Tuesday, and 178.24 on Wednesday. However, the rupee bounced back in the next two sessions, improving to Rs177.51 on Thursday and Rs176.51 on Friday.
The currency experts said that appreciation of the local currency can be attributed to the tabling of the State Bank of Pakistan’s autonomy bill in the National Assembly. They said that the year-end payment settlements have also dipped the demand for the dollar in the interbank market.
However, they warned that the rupee may join back its downward trend at the beginning of the new year as the government has to pay huge import bills, saying the widening of trade and current account deficits are major threats to the rupee’s stability.
According to experts, the recent depreciation of the local unit is dictated by the International Monetary Fund (IMF) through prior actions and it has nothing to do with macroeconomic fundamentals. They said that pressure mounted on the rupee in recent weeks, with everything now hinging on whether the government strikes a deal with the IMF over the release of new funds. To land the deal, the government has presented a mini-budget in the National Assembly, which will presumably pave the way for an IMF agreement and the release of funds. It is expected to give the rupee some respite.
They said a number of measures have been taken to restrict the import of luxury and non-essential items. They said the rising import bill and the current account deficit would remain a challenge for the local currency in the coming days.
Further, the decline in the foreign exchange reserves also threatened the rupee stability. The foreign exchange reserves held by the country decreased to $24.27 billion from $24.63 billion in a week, the SBP said on Thursday. The reserves held by the central bank decreased to $17.855 billion, while the reserves of commercial banks dropped to $6.41 billion from $6.48 billion.
