Rupee drops against dollar in interbank market

KARACHI: The rupee ended weaker in the interbank market on Monday due to fiscal year-end dollar demand from importers.The rupee closed at 278.62 per dollar, compared with the previous close of 278.51.

Dealers said that the local currency saw a little decline since, typically, at the end of June, the last month of FY2023-2024, there is a higher demand for US dollars for imports and dividend payments to overseas investors.

In addition, dealers said that the rupee is under pressure due to Pakistan’s worsening current account, stagnating foreign exchange reserves, and anticipation of further rate cuts in the second half of 2024.

The rupee is expected to weaken, but analysts do not believe it will surpass the 280 per dollar mark as foreign investments in local currency bonds and stocks would keep the rupee from falling too much compared to the dollar.

Pakistan recorded a $270 million current account deficit (CAD) in May after three consecutive months of surplus. The primary deficit, which is about a billion dollars greater than the monthly average of the first 10 months, is the primary cause of the higher deficit. Despite $3.24 billion record remittances, the current account balance turned negative. Analysts estimate that the current account deficit will be even larger in June.

The rupee edged higher against the dollar in the open market. The local currency was trading at 280.32 per dollar, compared with 280.35 in the previous session.