December 24, 2021 (MLN): Pakistani rupee (PKR) settled relatively flat today as the local currency closed the week against USD at PKR 178.13.
The rupee traded in a narrow range of 30 paisa showing an intraday high bid of 178.30 and an intraday low offer of 178.
Departed week observed the loss of only 9 paisa, compared to the depreciation of 33 paisa in the previous week which was concluded at PKR 178.04 per USD.
With the dollar settling at 178 level, it has been observed that volatility is reducing.
The stability could be attributed to the recent decision of Monetary Policy Committee (MPC) wherein it has raised the policy rate by 100 basis points (bps) to 9.75 percent to counter inflationary pressures and ensure that growth remains sustainable.
However, the pressure on PKR still persits owing to the depleting foreign exchange reserves as the reserves held by the country dipped by $394.8 million or 1.67% WoW to stand at $24.63 billion during the week ended on December 17, 2021, compared to $25.02 billion in the previous week.
“In past policy makers managed excessive PKR vs $ fall through foreign borrowing & sterilization staying on sidelines,” Asad Rizvi, the former Treasury Head at Chase Manhattan said.
“Market paid no heed to the news of IMF board meeting,” he added.
Meanwhile, the State Bank of Pakistan (SBP) has been taking numerous measures. Continuing the efforts to enhance documentation and transparency in the foreign exchange regulatory regime, the State Bank of Pakistan (SBP) has fixed the limit of individual purchase of foreign exchange which shall not be more than $10,000 per day and $100,000 per year or equivalent in other currencies per calendar year, in the form of cash or outward remittances.
But eventually, these measures have pushed the market participants to make transactions from gray market or through Hawala Hundi, Khurram Shahzad, Financial expert told Mettis Global lately.
“It has been observed that before SBP’s restriction of biometric verification, the $7-8million dollars on daily basis were transacted through open market, but the implementation of biometric verification has narrowed down the transaction to $2-3mn. The difference of amount has moved to the gray market,” he explained.
Adding to it, he said whenever, government imposes any restriction, the secondary/undocumented market becomes active which needs to be controlled at utmost priority, he added.
From July’21 to date, the local unit has lost Rs20.58 against the USD. Similarly, the rupee fell by PKR18.29 in CY21, with the month-to-date (MTD) position showing a decline of 1.35%, as per data compiled by Mettis Global.
Within the open market, PKR was traded at 176.10/178.15 per USD.
Meanwhile, the currency lost 64 paisa to the Pound Sterling as the day's closing quote stood at PKR 238.72 per GBP, while the previous session closed at PKR 238.08 per GBP.
Similarly, PKR's value weakened by 9 paisa against EUR which closed at PKR 201.93 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 Rs701 billion and Rs381.75 billion into the market for 7 days and 63 days at 9.82% and 9.85%, respectively, bringing total injections to Rs1.08 trillion.
The overnight repo rate towards the close of the session was 9.75/10.00 percent, whereas the 1-week rate was 9.75/9.85 percent.
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