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Rupee kicks off week on wobbly note, depreciates over Re1 against dollar

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1 year ago

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  • Rupee depreciates 1.35 or 0.45% against dollar in interbank market. 
  • Expert says the backlog of payments putting pressure on the rupee.
  • Traders had feared that the rupee may further depreciate this week.

Rupee took a hit against the dollar on Monday as the local currency depreciated by more than Re1 in the interbank market.

According to the State Bank of Pakistan (SBP), the rupee closed at Rs297.13 against the dollar compared to Friday’s close of Rs295.78.

The local currency depreciated Rs1.35 or 0.45% against the greenback.

Capital market expert Saad Ali told Geo.tv that blamed the news of the current account deficit in July after four months of surplus and “lack of any new positive news on external inflows” for the rupee’s depreciation.

“I think the pressure on the PKR may be coming from the backlog of external payments now that all import restrictions have been removed on the International Monetary Fund’s urging,” he added.

The News had reported a day earlier that traders were fearing that the Pakistani rupee is expected to remain under pressure during this week due to an increase in dollar demand as a result of the clearing of import backlogs and dividend payments.

Fears that the caretaker administration will be in place for a long time and that this year’s elections may not be held as planned are likely to weigh on sentiment towards the rupee, the publication reported.

The rupee fell by 1.46% last week against the dollar in the interbank market. The rupee’s value against the dollar was 291.51 last Monday, but it fell further to end the week at 295.78 on Friday.

“The rupee is expected to continue to decline in the coming days due to the demand for dollars created by the release of delayed import and dividend payments,” a foreign exchange trader told The News.

“The import restrictions have been eased in line with the requirements of the International Monetary Fund. There was a backlog of payments before the IMF’s stand-by arrangement because there were not enough foreign exchange reserves,” the trader added.

The market is driven by supply and demand, with no intervention from the central bank, according to the trader.

The SBP said in its July monetary policy statement that the “market-determined exchange rate will continue to serve as the first line of defence against external shocks and support reserve build-up”.

However, Pakistan’s current account balance ended its four-month streak of surpluses in July with a deficit of $809 million. Increased imports were the main reason.

The foreign exchange reserves held by the SBP slightly rose by $12 million to $8.05 billion in the week ending August 11.

The market is bracing for the rupee to cross past the historic level of 300 per dollar, said Tresmark in a client note on Saturday.

“This appears to be the market consensus,” the firm said.

“However, in our opinion, there is a material likelihood of an ad hoc hike in interest rates, which may relieve some pressure off the rupee. Essentially, we expect the rupee to trade the coming week under the 300 level,” it added.

“Our view also factors in the increase in swaps, which depicts healthy liquidity levels, and micro-management of imports, and is based on the premise that a weak rupee will further exacerbate the inflation problem.”

A quick analysis of the last five interim governments shows that the local currency has depreciated every time, with an average of about 6%, according to Tresmark.

The currency also depreciated, every time, in the first three months that the newly elected government came in, averaging about 3%.

“Whereas interest rates increased by an average of 80 basis points in the interim government phase, but stayed largely stable in the first 3 months of elected government,” the firm noted.

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Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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11 hours ago

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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12 hours ago

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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2 days ago

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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