KARACHI:
The Pakistani currency continued to depreciate for the third consecutive business day on Tuesday as it touched Rs 279.31 against the US dollar in the interbank market.
According to State Bank of Pakistan (SBP) data, the rupee depreciated by 0.02%, or Rs 0.05, against the dollar on a daily basis.
Market talk suggested that exporters were charging a higher premium on selling in US dollar futures, which put the rupee under some pressure. Otherwise, there was an ample supply of foreign exchange in the domestic market.
More importantly, the rupee has recovered 10%, or Rs28, in the past five-and-a-half months, hitting a four-month high of Rs279.11/$ late last week compared to an all-time low of Rs307.10/$ touched the first week of September 2023.
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Financial experts said the significant recovery made the rupee overvalued, which meant there was some room for depreciation in the near term.
They pointed out that the upward trend in international oil prices also played a role in weakening the rupee over the past three days as the development forced importers to pay a slightly higher price for the foreign currency.
The rupee has been trading in a narrow band of Rs 279-280/$ for more than five weeks. In the open market, the currency remained flat at Rs282.05/$ for the second straight day, according to the Pakistan Exchanges Association. With this, the spread between rupee rates in the two markets widened to Rs 2.74 (nearly 1%), about a quarter of a percentage point away from the peak of 1.25% (about Rs 4 at current levels) that suggests the IMF.
Published in The Express Tribune, March 6u2024.
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