Rupee near record low on strong dollar

Erum Zaidi
Thursday, Sep 22, 2022

KARACHI: The rupee fell for a 14th successive session on Wednesday to close near the record low on ramped up dollar demand from oil importers and broad strength in the greenback against major currencies, dealers said.

The rupee closed at 239.65 per dollar in the interbank market, after touching a lifetime low of 240 in the intraday trade. It finished at 238.91 in the previous session. The rupee ended at a record low of 239.94 to the dollar on July 28.

In the open market, the rupee was quoted at 245.40 against the dollar, Exchange Companies Association of Pakistan said.

Analyst Yousuf Rahman at KASB Securities said factors against the rupee’s decline included significant dollar outflows because of debt servicing as gross financing needs for the year are estimated at $32 billion and the floods have forced the government to import vegetables, grains, and cotton to replace damaged crops.

“This has further added strain on the import bill and there have been news of consistent dollar outflows from grey channels, particularly through the Afghanistan border,” Rahman said.

He said the fundamentals and sentiments for the battered rupee won't improve until anticipated inflows from friendly countries happen.

“Once additional financing is received from the World Bank, ADB [Asian Development Bank], and allied countries, the rupee may stabilise around the 215 mark,” Rahman added.

The revival of the International Monetary Fund bailout programme and release of a $1.1 billion loan tranche from the Fund supported the rupee briefly in late August.

However, the currency is again struggling. The rupee has fallen by 8.72 percent so far this month.

"Dollar strength and high commodity prices are impacting regional and major currencies,” said Komal Mansoor, the head of research at Tresmark.

“Indian Rupee also traded above 80/dollar this week, and they have spent $90 billion to defend their already stable currency. Yuan, euro, and sterling have all depreciated to multi-year lows,” Mansoor said.

But the local currency hitting new lows is worrisome for the economy because it shows the government’s inability to stabilize forex reserves and reverse negative sentiment, he added. “Some sort of a two-way direction is crucial for the currency.”

Pakistani rupee is among the worst performer in Asia. It has lost 26.35 percent versus the greenback since the beginning of the calendar year.