March 04, 2022 (MLN): Despite enduring a choppy trail on the back of escalating commodity prices in the international market, the Pakistani rupee (PKR) managed to gain 33 paisa against the US dollar as the currency closed the day's trade at PKR 177.5 in the interbank market.
During the day, the rupee traded within a very narrow range of 20 paisa per USD showing an intraday high bid of 177.75 and an intraday low offer of 177.60.
While taking a bumpy ride throughout the week, the currency has lost 39 paisa against the greenback, as the previous week was concluded at PKR 177.11 per USD.
However, the currency took some breather on Tuesday, securing a small gain of 6 paisa.
The ongoing instability in the interbank market is linked to the geopolitical disturbance created after Russia's invasion of Ukraine that pushed prices of global commodities into an upward spiral on the threat of supply shortages in coming days.
In addition, the western allies of Ukraine have also ramped up of sanctions as it has cut off a few Russian banks from the SWIFT financial network while, limiting Moscow's ability to deploy its $630 billion foreign reserves.
In addition to it, the trade deficit on the back of hefty import bills has been created pressure on the local unit. However, in the month of February, Pakistan's merchandise trade deficit clocked in at $3.1 billion compared to a deficit of $3.4bn in the previous month, depicting a decline of 9.7% MoM as imports declined by 2.3% MoM.
With regards to the foreign exchange reserves, the rapid growth in trade deficit is caused by higher imports and a mild slowdown in remittances pushing SBP’s reserves down to $16.46bn that could exert pressure on the current account, Asad Rizvi, the former Treasury Head at Chase Manhattan said.
In February foreign exchange reserves remained under pressure dropping for the fourth consecutive week, he added.
To note, the total liquid foreign exchange reserves held by the country dropped by $350.9 million or 1.51% WoW to stand at $22.87 billion during the week ended on February 25, 2022, compared to $23.22bn in the previous week.
Meanwhile, the local unit has lost Rs19.95 against the USD from July’21 to date, while it depreciated by 0.78 paisa in CY22 with the month-to-date (MTD) position showing a drop of 0.018%, as per data compiled by Mettis Global.
During the last 52 weeks, PKR lost 14.2%, reached its lowest at 178.235 on December 29, 2021, and touched its high of 152.28 on May 7, 2021.
Furthermore, the local unit has depreciated by 8.19% since its high on October 25, 2021, against EUR. While, the local unit has weekend by 11.34% against GBP since its high on April 09, 2021.
Within the open market, PKR was traded at 177.50/178.50 per USD.
Meanwhile, the currency gained 1.7 rupees against the Pound Sterling as the day's closing quote stood at PKR 236.45 per GBP, while the previous session closed at PKR 238.18 per GBP.
Similarly, PKR's value strengthened by 1.8 rupees against EUR which closed at PKR 195.42 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 Rs2.33 trillion into the market for 7 days at 9.76 percent.
The overnight repo rate towards the close of the session was 9.70/9.90 percent, whereas the 1-week rate was 9.75/9.85 percent.
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