Rupee loses 31 paisas against US dollar

Rupee loses 31 paisas against US dollar

A currency dealer can be seen counting Rs500 notes. — AFP/File

With a fresh fall of 0.19%, the currency closed at Rs170.79 against the US dollar in the inter-bank market on Monday.

Analysts say direction of local currency will depend on how IMF negotiations evolve next week.

“The situation in Afghanistan is adding fuel to the already depreciating currency,” says Samiullah Tariq.

KARACHI: Pakistani currency dropped to an all-time low of Rs170.79 against the US dollar in the inter-bank market on Monday.

With a fresh fall of 31 paisas or 0.19%, the local currency closed at Rs170.79 against the US currency.

Speaking to Geo.tv, Pakistan-Kuwait Investment Company’s Head of Research Samiullah Tariq said that the Pakistani currency is losing its value because of the demand-supply crisis.

It is pertinent to mention here that the dollar demand from importers ballooned due to increased import payments. Higher current account deficit and a spike in international oil prices also continued to put pressure on the local unit.

“The situation in Afghanistan is adding fuel to the already depreciating currency,” Tariq added.

The recent bill moved by a group of US Senators, which is seeking to impose sanctions on the Afghan Taliban and entities providing support for them including Pakistan, is affecting sentiment on the rupee.

“The central bank is not intervening and is expected not to intervene, going forward,” he said.

Financial experts expect the rupee to remain stable in the near term as market players are expected to take limited positions ahead of forthcoming talks with the International Monetary Fund on the sixth review of the $6 billion Extended Fund Facility.

“We may have a sort of a breather in the foreign exchange market over the next week as the steps were taken by the central bank will slow down imports and subsequently demand the greenback,” said a foreign exchange trader.

He added that the direction of the local currency will depend on how the IMF negotiations evolve next week.

“Most players [investors and importers] are unlikely to build long positions during IMF talks.”

However, Tariq said that the direction of currency will be prominent during a period of two weeks.

The staff-level discussions between Pakistan and the IMF are to begin today, while Finance Minister Shaukat Tarin is scheduled to attend annual meetings of the World Bank and the IMF from October 11-17 in Washington.

Successful negotiations will pave the way for releasing $1 billion disbursements from the IMF and also help support the rupee in the months ahead.

Higher Oil Prices and Inflation Fears Led to USD/INR Breach Resistance at 74.50

opened the day a lot higher at 74.64 registering a sharp rise of 33 paise/USD over its previous day’s close, as Evergrande debt problem and higher global oil prices lifted the safe-haven assets demand. The currency pair is expected to test the next resistance at 74.80 and the possible RBI intervention at that level can be expected to contain the currency volatility in the local market.

During the period from the end of December 2020 to 30-9-21, registered a whopping gain of 23.82% followed by 14.95%, gain in Taiwan Weighted Index and a 10.81% rise in the Thai Set Index. fell by 9.75% followed by a fall of 5.48% in KLCI. In the above period, all the Asian currencies fell with the exception of a 1.62% gain in yuan. Thai Baht fell by 12.07% followed by a depreciation of 9.19% in Korean Won and 6.31% in Philippine Peso. The depreciation of INR against the dollar was lowest at 1.59% in the above period.

In the comparable period as mentioned above, the gained by 4.17% which had resulted in a 5.18% depreciation in Euro, 1.47% against the GBP and 5.26% against the Swiss Franc. As a result of the lower depreciation of the rupee against the dollar, the rupee registered gains of 4.12% against the Euro and 6.44% against the Japanese Yen. Due to the withdrawal of swap market operations with Banks by RBI which ended in May 2021, the 6-month forward dollar premium fell by 0.61% per annum. prices registered a whopping gain of 51.41% in the above period which led to a steep rise in the prices of petrol and diesel and a consequent increase in imported inflation.

India’s trade deficit widened to USD 22.94 billion in September 2021 from USD 2.72 billion in the same period last year. Due to a sharp hike in oil prices, total imports jumped to USD 56.38 billion and exports rose at a softer 21.3% to USD 33.44 billion. It seems quite possible to achieve the exports of USD 400 billion set by the Government in the current financial year. The increase in trade gap may not pose any problem to BOP, due to the higher current account and capital inflows expected to be received in the current fiscal, by way of divestment proceeds from BPCL, SCI and LIC of India and also from many IPOs in the pipeline.

Rupee slides, bond yields rise as MPC meets tomorrow on deciding rates

The weakened and bond yields rose Tuesday as crude prices shot up to a seven-year high, pulling down stocks globally and firming up the dollar index.

The rupee was at 74.53 a dollar at 11.40am, down from its previous close of 74.31, as the dollar index crossed 94: its highest level since November 2020. Rupee’s intraday low of Rs 74.63 was the lowest since July 20 this year.

The dollar index measures the greenback’s strength against major global currencies. The 10-year bond yields were at 6.274 per cent, up from its previous close of 6.248 per cent.

The NASDAQ fell over 2 per cent overnight, bringing down the global markets. However, the Indian equities remained largely steady aided by domestic investors. The Sensex was at 59,256.13, down just 43.19 points, or 0.073 per cent.

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The rise in bond yields, however, will make the monetary policy committee’s (MPC) policy decisions trickier. The six-member committee, headed by governor Shaktikanta Das, is meeting for three days starting Wednesday to decide on rates. The central bank has kept rates low even before the pandemic started, but rising yields make its objective of supporting growth difficult. However, the central bank also gave a signal about its comfort with higher rates by allowing the cut-off at the seven-day reverse repo at 3.99 per cent, the same as the repo rate.

Notwithstanding the measures taken by the central bank in its upcoming policy, it will likely “move gradually, trying to minimise market disruption to the best of its ability," HSBC noted in a report on Tuesday.

“Domestically, the rupee has been feeling the prick of pins and needles right from the soaring trade deficit, a steady dollar rebound, and 7-year high moving crude oil prices," said Amit Pabari, managing director of CR Forex.

“That apart, fears of further defaults by Evergrande are dragging the risk-off sentiment and continue to underpin dollar rebound, thereby putting USDINR pair under pressure," Pabari said.

However, the upcoming initial public offerings should help make rupee a turnaround, or prevent it from a rapid slide. Besides, the near $640 billion reserves of the RBI should be able to give stability to the Indian currency as well, according to experts.