KARACHI:
The Pakistani currency fell Rs 0.14 to a fresh two-week low of Rs 278.40 against the US dollar in the interbank market, maintaining its downward trend for a second straight business day amid ongoing talks on a new borrowing program, possibly by June or July 2024.
According to State Bank of Pakistan (SBP) data, the rupee had closed at Rs 278.26 against the dollar on Wednesday. The currency has lost a net 0.50% or Rs 1.37 in the past six weeks compared to its five-and-a-half-month high of Rs 277.03/$ in the last week of March 2024.
Before that, the currency gained 10.85%, or Rs 30.07, in six-and-a-half months to reach Rs 277.03/$.
Speaking to The Express Tribune, an analyst said the International Monetary Fund’s (IMF) recommendation to liberalize imports and make the rupee-dollar peg the first line of defense against shocks in the external economy triggered the latest gradual devaluation of the local currency. . .
He said the IMF recommendation turned market sentiment on the rupee slightly negative as Pakistan was in negotiations with the lender.
Otherwise, the fundamentals for the rupee-dollar rate have remained unchanged. There is no increase in demand for dollars to make payments for imports, the current account deficit has continued to shrink, and international oil prices are on a downward trajectory.
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He expects the currency to remain stable at least in the short term. However, in case the gradual depreciation continues, the rupee may reach Rs 285/$ by the end of June 2024.
In the meantime. Pakistan’s foreign exchange reserves, held by the SBP, hit a two-year high of $9.13 billion in the week ended May 10, 2024, widening the country’s import coverage to slightly less than two months.
The central bank said on Thursday that its foreign reserves rose by $15 million in one week.
The improvement apparently came in the wake of the central bank’s strategy to absorb the dollar surplus from the foreign exchange market. The bank has reportedly bought $5-5.5 billion so far this fiscal year.
Commercial bank reserves rose by $152.3 million in the week under review to $5.49 billion. As a result, Pakistan’s total reserves increased by $167.5 million to $14.63 billion, the central bank said.
Published in The Express Tribune, May 17u2024.
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