PKR slides by 19 paisa against greenback

January 16, 2023 (MLN): Riding on a downward trail, the Pakistani rupee (PKR) depreciated by 19 paisa against the US dollar on Monday as the currency closed the trade at PKR 228.34 per USD, compared to last session's closing of PKR 228.15 per USD in the interbank market session.

Within today’s session, the local unit traded in a band of 40 paisa per USD showing an intraday high bid of 228.50 and low offer of 228.10 while in the open market, PKR was traded at 236.4/238.76 per USD.

Along with the economic slowdown, the ongoing political melancholy also forced PKR towards a bottomless pit.

Recent events in Punjab are tricky for the financial market. Any further delay in making a decision will heighten uncertainty and could harm the economy, Asad Rizvi, former Treasury Head at Chase Manhattan said.

Donors too will wait for more clarity that could further postpone economic sustainability, he added.

The ailing rupee is enduring a rough ride due to melting reserves as the foreign exchange reserves held by the central bank stood at $4.34bn.

In order to improve foreign exchange reserves while luring dollars, the government should consider the option of a three-tier exchange rate against PKR, export-import bills, and remittances, Zafar Paracha General Secretary of the Exchange Companies Association of Pakistan (ECAP) said.

For instance, the government may offer PKR 240 per dollar to overseas Pakistani abroad and for receiving inward remittances. Resultantly, the volume of remittances will increase significantly and the grey market become less attractive.

Meanwhile, the government may quote PKR 228 per dollar for export proceeds while the rate for importers would be on weighted average rates of the home remittance (overseas Pakistanis) and for exporters, the rates should be PKR 234 per USD.

The said measure will motivate the exporter and overseas Pakistani/exchange companies including the home remittance business and de-motivate the elicitor business and import also throughout the non-channelize business, he added.

In the current situation where the economic conditions are abnormal and banks are reluctant to open the Letters of Credit (LC)s for which various LCs are either pending or in the pipeline, he highlighted.

In FYTD, PKR lost 23.49 rupees or 10.29%, while it plummeted by 0.41% against the USD in the last seven sessions, as per data compiled by Mettis Global.

Meanwhile, the currency lost 87 paisa to the Pound Sterling as the day's closing quote stood at PKR 279.2 per GBP, while the previous session closed at PKR 278.32 per GBP.

Similarly, PKR's value weakened by 2 paisa against EUR which closed at PKR 247.27 at the interbank today.

On another note, within the money market, The State Bank of Pakistan (SBP) conducted an Open Market Operation (OMO) today, in which it moped up Rs530.65 billion into the market for 3 days at 15.95%.

The overnight repo rate towards the close of the session was 15.15/15.25%, whereas the 1-week rate was 15.05/15.15%.

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