July 15, 2022 (MLN): Following the uncertain economic situation on the back of delay in the IMF tranche, melting foreign exchange reserves, and pressure of import bill payment, the Pakistani rupee (PKR) has lost three rupees against the US dollar in three consecutive sessions to settle the week’s trade at PKR 210.95 per USD.
Within today’s session, the local unit has depreciated by 1.2 rupees against the US dollar. However, in early trade, it managed to gain 1.3 rupees on the back of IMF's official announcement on Wednesday regarding the staff level agreement but later joined back its downward trail.
Throughout the session, the rupee endured a volatile trading session with quotes being recorded in a range of 2.5 rupees per USD showing an intraday high bid of 211 and an intraday low offer of 209.15.
While sinking to the bottomless pit, the domestic unit witnessed a massive fall of 2.2 rupees on Wednesday as the market had opened after a 5-day long Eid holiday and the demand for dollars remained elevated due to payment of import bills.
However, on Thursday, the local unit observed a recovery of 30 paisa on the news of IMF as per which Pakistan will receive $1.177 billion after the approval of IMF’s Executive Board, bringing total disbursements under the program to about $4.2 billion.
The IMF Board will also consider an extension of the EFF until end-June 2023 and an augmentation of access by SDR 720 million which will bring the total access under the EFF to about $7 billion.
It is pertinent to mention that demand for dollars in the international market has also jumped and set for its third week of gains as a fresh slew of rate hikes around the world deepened concerns about the outlook for global economic growth.
Gradually, the PKR is losing its all-previous marginal gains which have been secured in the name of Chinese $2.3bn in the absence of IMF tranche, melting reserves that are currently standing at $15.6bn with the import cover of 1.41 months, and deteriorating current account balance due to higher import bill.
In CYTD, the local unit plummeted by Rs34.44 or 16.33% against the USD while it registered a decline of 2.90% against the greenback in MTD, as per data compiled by Mettis Global.
During the last 52 weeks, PKR lost 24.18% against the greenback while reaching its lowest at 211.93 on June 22, 2022, and the highest of 159.93 on July 16, 2021.
Furthermore, the local unit has weakened by 10.75% and 11.27% against EUR and GBP, respectively since its high on July 16, 2021.
The performance of the local unit remained bleak against other major currencies in MTD as the currency lost its value by 2.90%, 2.85%, 1.87%, 0.93%, 0.47%, and 0.34% against AED, SAR, CNY, JPY, GBP, and CHF, respectively. On the other hand, PKR appreciated against EUR by 1.05% during the same period.
Meanwhile, the currency lost 57 paisa to the Pound Sterling as the day's closing quote stood at PKR 249.64 per GBP, while the previous session closed at PKR 249.07 per GBP.
Similarly, PKR's value weakened by 98 paisa against EUR which closed at PKR 211.58 at the interbank today.
Money Market:
On another note, within the money market, the overnight repo rate towards the close of the session was 14.10/14.20 percent, whereas the 1-week rate was 14.13/14.23 percent.
Following the rise in the policy rate to 15%, the six-month Karachi Interbank Offered Rate (KIBOR) has been increased to its all-time high level of 15.87%, up by 35 basis points (bps) DoD. Accordingly, the spread between the policy rate and KIBOR stood at 87 bps.
In the backdrop of the 15% policy rate, the current rate of KIBOR is justified, Fahad Rauf, Head of Research at Ismail Iqbal Securities told Mettis Global.
The increase would discourage investment in the economy. The business community/borrowers will have to bear the burden as they have to pay more interest, he added.
Copyright Mettis Link News
34072
