PKR drops by 1.3 rupees in a week

February 25, 2022 (MLN): Sticking to its downward slide, the Pakistani rupee (PKR) has lost a further 72 paisa against the US dollar as the currency close the week’s trade at PKR177.11.

In the previous session, the domestic unit had dropped its value by 24 paisa to close at PKR176.39 per USD.

The rupee traded in a range of 55 paisa per USD showing an intraday high bid of 177.30 and an intraday low offer of 176.85.

During the week, the currency has lost 1.3 rupees against the greenback, as the previous week was concluded at PKR 175.86 per USD.

This sharp decline in the value of PKR is primarily attributable to the deteriorating current account balance owing to the increase in imports as the current account deficit (CAD) rose to $2.6 billion in January 2022 from $1.9bn in December 2021. In addition, the shrinking foreign exchange reserves have also played their due role to put pressure on the local unit as the total liquid fx has dropped to $23.2bn.

 Meanwhile, the dollar demand was remained elevated this week due to the long weekend in New York where banks could not receive funds in their Nostro Account as activity especially on Monday on account of Washington’s Birthday when PKR gained 11 paisa.

Furthermore, the local unit has been enduring pressure from geopolitical instability owing to the Russia-Ukraine conflict. The currency will witness a major hit as the global market is witnessing a historic surge in commodities prices and threats of supply shortages.

The consequences of conflict could be immense on oil-importing emerging economies. In addition, Russia and Ukraine are also major wheat exporting countries that will bite importers, Asad Rizvi, the former Treasury Head at Chase Manhattan said.

Pakistan’s current account deficit could go haywire, he warned.

Meanwhile, the local unit has lost Rs19.57 against the USD from July’21 to date, While it depreciated by 0.59 paisa in CY22, with the month-to-date (MTD) position showing a drop of 0.22%, as per data compiled by Mettis Global.

The month to date performance of PKR remained comparatively better against major currencies as the local unit appreciated by 1.75%, 1.61%, 1.47%, 1.37%, 1.39%, 0.38%, and 0.35% against AUD, EUR, CAD, CHF, CNY, GBP, and SAR, respectively.

Within the open market, PKR was traded at 177.50/178.50 per USD.

Meanwhile, the currency lost 22 paisa to the Pound Sterling as the day's closing quote stood at PKR 237.65 per GBP, while the previous session closed at PKR 237.42 per GBP.

Similarly, PKR's value weakened by 22 paisa against EUR which closed at PKR 198.59 at the interbank today.

On another note, within the money market, the State Bank of Pakistan (SBP) conducted an Open Market Operation in which it injected Rs2.14 trillion into the market for 7 days at 9.82 percent.

The overnight repo rate towards the close of the session was 9.70/9.90 percent, whereas the 1-week rate was 9.85/9.95 percent.

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