Rupee continues losing streak against dollar


Rupee continues losing streak against dollar

The Pakistani rupee maintained its losing streak against the US dollar at the start of the new business week on Monday, as massive destruction caused by the floods continues to worsen the country’s economic crisis.

The local unit lost Rs 0.82 to trade at Rs 229 against the US dollar in the interbank market during intraday trade from 12:30 p.m.

Despite IMF inflows, the Pakistani rupee is expected to continue its downward spiral against the dollar in the interbank market next week as a lack of strong central bank intervention and no clear strategy to turn around the economy depresses investors, traders said.

“Emerging currencies have suffered greatly from the appreciation of the US dollar against major currencies following relentless Federal Reserve rate hikes and increased demand for safe havens, but the Pakistani rupee’s sharp decline of more than 4% in the past six trading sessions have fueled investor uncertainty,” said a currency trader.

The interbank market tracks losses on the open market. The temporary hold on imports has shifted the problem to smuggling from Afghanistan against cash dollar payments, increasing the appetite for dollars on the open market. Other secondary factors are cash forex requirements for Dubai travelers, declaration of dollars from inbound passengers, severe accessibility issues for collection in parts of all provinces.

The difference between the interbank market and the open market creates an incentive for foreign currency (FCY) accounts to withdraw US dollars and sell to the open market. While ultra-low interest on FCY accounts does not help attract new deposits, according to Tresmark’s note.

Analysts see many opportunities for inflows from friendly countries, bilateral institutions and sovereigns (in the form of flood aid). There is also a high probability that the mandate with the IMF can be increased by around 2.5 billion dollars. But the energy crisis in Europe is going to test and stretch the global financial markets.



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