July 20, 2022 (MLN): Political uncertainty has forced the Pakistani rupee (PKR) to maintain its losing streak against the greenback as the currency closed the day's trade at PKR 224.92 per USD compared to yesterday's closing of PKR 221.99 per USD.
The rupee endured a highly volatile trading session with quotes being recorded in a range of three rupees per USD showing an intraday high bid of 225.50 and an intraday low offer of 223.50 while in the open market, PKR was traded at 223/225 per USD.
Since PKR is enduring a state of freefall, the rate of the Letter of Credit (LCs) for the importers of oil has surged to PKR 242 per USD by the end of today’s session.
It is pertinent to mention that the State Bank of Pakistan (SBP) on Tuesday termed the recent depreciation of the Pakistani rupee (PKR) a feature of a market-determined exchange rate system and linked to the global phenomenon of the other currencies’ depreciation against the USD.
Meanwhile, Federal Minister for Finance and Revenue Miftah Ismail is of the view that the rupee's slide on political turmoil and market jitters over the currency's sharp decline to subside soon.
“The rupee downturn is not due to economic fundamentals,” he added.
The finance minister said imports, which put pressure on the rupee, have been curbed and the current account deficit has been controlled in the first 18 days of June.
However, Ali Khizer, a senior economist termed this statement wrong and said, “The payment pressure today is due to imports in the last two months. LCs usually retire in 30-60 days.”
In a series of Tweets, he said, “The imports in June for energy are biting us. The supposedly speed to end load shedding has resulted in importing expensive LNG on spot & RFO at exuberant rates.”
The load shedding is still here with the dearer dollar. The fall in imports in July is to calm the market next month or so, he added.
With panic in the last two days, inflows were stopped – exporters and remitters were waiting for the rate to settle to have maximum gains. Now with the market settling at 225, the inflows may normalize, he noted.
He was of the view that in a time of fast depleting foreign exchange reserves, $4bn from friendly countries and IMF's board approval are crucial. It is important to have political stability and the political parties should sit and decide the next election dates.
Otherwise, the free fall episodes continue, he warned.
Speaking to Mettis Global, Malik Bostan, President of Forex Association of Pakistan suggested that the government should avail of the option of barter trade with Afghanistan to avoid an outflow of dollars. Meanwhile, for the import of oil at cheaper rates, the authorities should get in touch with Iran. This way, the government would be able to save $24bn.
He also added that measures must be taken to slash the energy import to reduce the import bill.
In CYTD, the local unit plummeted by Rs48.40 or 21.52% against the USD while it registered a decline of 8.92% against the greenback in MTD, as per data compiled by Mettis Global.
During the last 52 weeks, PKR lost 28.32% against the greenback while reaching its lowest at 224.99 on July 20, 2022, and the highest of 161.22 on July 26, 2021.
Furthermore, the local unit has weakened by 17.49% and 17.73% against EUR and GBP, respectively since its high on July 26, 2021.
The performance of the local unit remained bleak against other major currencies in the last seven sessions as the currency lost its value by 8.36%, 7.52%, 7.40%, 6.59%, 6.53%, 6.13%, and 5.86% against EUR, CHF, GBP, CNY, AED, SAR and JPY, respectively.
Meanwhile, the currency lost 3.1 rupees to the Pound Sterling as the day's closing quote stood at PKR 269.76 per GBP, while the previous session closed at PKR 266.64 per GBP.
Similarly, PKR's value weakened by 2.8 rupees against EUR which closed at PKR 230.12 at the interbank today.
The overnight repo rate towards the close of the session was 14.10/14.25 percent, whereas the 1-week rate was 14.35/14.45 percent.
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