The Pakistani rupee fell a massive 6.6% against the US dollar during the opening hours of the trading session on Thursday.
At around 11:30am, the rupee was being quoted at 284.88, a decrease of Rs18.77, against the US dollar during intra-day trading.
The rupee had plummeted against the US dollar on Wednesday as well but the fall was less sever as the currency settled at 266.11 after a depreciation of 1.73% or Rs4.61 in the inter-bank market.
In comments to Business Recorder, Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited (IISL), said the ongoing rupee’s depreciation is part of a market correction.
“A significant gap in rates was created between the open and inter-bank market, which became unsustainable.
“Moreover, reports around International Monetary Fund (IMF) are also not positive, denting investor sentiment,” said Rauf. He added volatility would remain until IMF programme is revived and inflows are materialised.
In a note, CEO Topline Securities Mohammed Sohail said that the delay in the resumption of the IMF programme is leading to market volatility.
“Delay in IMF funding is creating uncertainty in currency market,” he said.
The development comes on a day when the SBP is also expected to announce further monetary tightening to control inflation at the central bank’s emergency Monetary Policy Committee meeting scheduled for later on in the day.
In a key development, Pakistan’s trade deficit narrowed by 33.18% to $21.3 billion during the first eight months (July-February) of the current fiscal year 2022-23 as compared to $31.879 billion during the same period of last year, the Pakistan Bureau of Statistics (PBS) said.
Internationally, the dollar caught its breath in Asia on Thursday, steadying as US yields went up while investors waited on European inflation data, after nasty surprises in Germany, France and Spain have given a boost to the euro this week.
The dollar lost 0.9% on the euro on Wednesday, its sharpest drop in a month. It was about 0.2% firmer on the euro on Thursday, with the common currency at $1.0649 in Asia trade ahead of inflation data due at 1000 GMT.
The US dollar index rose 0.2% to 104.58, helped as US Treasury yields hit fresh high during Asia trade and as Federal Reserve official Neel Kashkari left the door open to a 50 basis point rate hike at the Fed’s next meeting in March.
Oil prices, a key indicator of currency parity, inched up on Thursday, extending gains from the previous two sessions on signs of a strong economic rebound in China, the world’s top oil importer, though gains were capped by a rise in US crude inventories and concerns over overall global demand.
