June 03, 2022 (MLN): Breaking its 5-day gaining streak, the Pakistani rupee (PKR) on Friday joined back its downward journey, depreciating by 33 paisa against the US dollar in today's interbank session. The currency settled the week’s trade at PKR 197.92 compared to the previous week’s closing of PKR 199.76 per USD.
During the week, the local unit managed to gain 1.8 rupees against the greenback on the back of the government’s decision to unwind the fuel subsidy. This much-needed decision had cleared the haze of uncertainty from the market which helped the rupee to recover its previous losses to some extent.
The aforesaid decision came after the recent talk of government with IMF in Doha wherein IMF’s official demanded the removal of power and fuel subsidy to unlock the next tranche.
Accordingly, the government has raised petrol prices by Rs60 per litre within a week while NEPRA hiked power tariff by Rs9 per kWh.
Minister for Finance and Revenue, Miftah Ismail informed lately that the staff-level agreement with IMF would be signed in the ongoing month.
However, Moody's Investors Service (Moody's) on Thursday downgraded Pakistan’s outlook to negative from stable which has badly impacted the confidence of market participants.
The decision to change the outlook is driven by the country’s heightened external vulnerability risk and uncertainty around the sovereign's ability to secure additional external financing to meet its needs.
As a result, the domestic unit has snapped its winning streak in today’s session while being traded in a range of 55 paisa per USD, witnessing an intraday high bid of 197.95 and an intraday low offer of 197.65. Within the open market, PKR was traded at 197.25/198.80 per USD.
In addition to it, the plummeting foreign exchange reserves and widening trade deficit have also created pressure on PKR.
Asad Rizvi, the former Treasury Head at Chase Manhattan bank termed the present situation “Directionless.”
“It’s quite a mixed bag of economic evidence. Things are surely not in order, and uncertainty will prevail. Tough times for PKR, as signs are not healthy,” he added.
Though the current status of foreign exchange reserves is quite depressing, the reserves will see a notable improvement in days to come as Pakistan will shortly receive $2.3bn from China.
According to Federal Minister for Finance and Revenue, the terms and conditions for refinancing of around $2.3bn deposit by Chinese banks have been agreed.
From July’21 to date, the local unit has lost Rs40.37 against the USD. Similarly, the rupee fell by Rs21.41 in CYTD, with the month-to-date (MTD) position showing an up of 0.27%, as per data compiled by Mettis Global.
During the last 52 weeks, PKR lost 21.88% against the greenback, reached its lowest at 202 on May 26, 2022, and touched its high of 154.61 on June 4, 2021.
Furthermore, the local unit has weakened by 12.28% since its high on July 02, 2021, against EUR while, it has dropped by 12.75% against GBP since its high on July 02, 2021.
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Likewise, the performance of PKR remained bleak against other major currencies as it weakened by 0.55%, 0.41%, 0.20%, 0.17%, and 0.16% against CHF, CNY, JPY, AED, and SAR, respectively.
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Meanwhile, the currency lost 1.3 rupees or 0.54% to the Pound Sterling as the day's closing quote stood at PKR 249.03 per GBP, while the previous session closed at PKR 247.68 per GBP.
Similarly, PKR's value weakened by 1.7 rupees or 0.80% against EUR which closed at PKR 212.93 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 Rs692.2 billion into the market for 7 days at 13.79 percent.
The overnight repo rate towards the close of the session was 14.40/14.50 percent, whereas the 1-week rate was 13.75/13.85 percent.
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