June 10, 2022 (MLN): The volatile journey of Pakistani rupee (PKR) has forced it to shed over 4 rupees in five consecutive sessions to settle the week at PKR 202.35, compared to the previous week’s was concluded at PKR 197.92 per USD.
In today’s session, the domestic unit lost 1.6 rupees after being traded in a band of over 1 rupee, showing an intraday high bid of 202.34 and an intraday low offer of 201.15. While, in the open market, PKR was traded at 201/202.50 per USD.
Along with dwindling macros, the demand for a 100% cash margin from foreign banks to open LCs has created enough panic in the interbank market as imports have to pay the overall bill in one go.
Pakistan is running out of foreign exchange reserves with the import cover of only 1.3 months. This is the major reason behind this condition of 100% cash margin by foreign banks. As a result, the spread rate in the interbank kept surging during the trading session.
In addition to it, the IMF has also asked the Pakistan side to renegotiate CPEC energy deals before making a payment of Rs300bn to Chinese power plants, Malik Bostan, President of Forex Association of Pakistan told Mettis Global.
Asad Rizvi, the former Treasury Head at Chase Manhttan said, the sharp decline in foreign exchange reserves is not a surprise for the economy that generates low income and is happy to raise funds to pay back.
Hence, the issuance of the PIED PIPER (IMF) will pave way for some inflows, he added.
From July’21 to date, the local unit has lost Rs44.80 against the USD. Similarly, the rupee fell by Rs25.83 in CYTD, with the month-to-date (MTD) position showing a decline of 1.92%, as per data compiled by Mettis Global.
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During the last 52 weeks, PKR lost 23.03% against the greenback while reaching its lowest at 202.82 on June 07, 2022, and the highest of 155.74 on June 11, 2021.
Furthermore, the local unit has weakened by 13.13% since its high on July 02, 2021, against EUR while, it has dropped by 13.92% against GBP since its high on July 02, 2021.
In addition, the performance of PKR remained bleak in MYTD as it weakened by 1.92%, 1.91%, 1.46%, 0.98%, and 0.86%, against AED, SAR, CNY, EUR, and GBP, respectively. On the hand, the local unit has appreciated by 2.45% against JPY in the same period.
Meanwhile, the currency lost 1.1 rupees to the Pound Sterling as the day's closing quote stood at PKR 252.4 per GBP, while the previous session closed at PKR 251.34 per GBP.
On the other hand, PKR's value strengthened by 3 paisa against EUR which closed at PKR 215.02 at the interbank today.
On another note, within the money market, the State Bank of Pakistan (SBP) conducted an Open Market Operation (OMO) in which it injected Rs924.3 billion into the money market through reverse repo purchase and Shariah-compliant mudarabah-based OMO.
The overnight repo rate towards the close of the session was 13.50/13.75 percent, whereas the 1-week rate was 13.65/13.75 percent.
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