Rupee drops to 157.51, gold shines

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KARACHI:

The Pakistani currency fell to its lowest level in three and a half months at Rs157.51 against the US dollar in the interbank market on Monday following the decision of the International Monetary Fund (IMF) to postpone the sixth review of the economy of the country until September.

In addition, the strengthening of the US dollar to multi-month highs against several other global currencies, including the euro and pound sterling, supported the lackluster gold market, which gained 1,550 rupees to a low. five-day high of 108,850 rupees per tola (11.66 gram) in Pakistan in line with global trend.

With a further decline of Rs0.62 on Monday, the rupee has cumulatively fallen Rs5.24 (or 3.44%) in the past month and a half from the 23-month closing high of Rs152.27 against the greenback May 7. , according to central bank data.

Pakistan and the IMF agreed to postpone the sixth economic review until September under the $ 6 billion loan program, as they failed to reach a staff-level agreement on measures to redress the situation. economy in the recently held negotiations. “It will also delay the release of the next tranche of the IMF loan to Pakistan (which has put pressure on the local currency),” Tahir Abbas, research director at Arif Habib Limited, said in a statement. interview with The Express Tribune.

Read more: The rupee strengthens against the dollar

In addition, the World Bank and the Asian Development Bank (ADB) have also delayed their loans of 1 billion dollars for Pakistan, he said.

However, the depreciation of the rupee appears to be a temporary phenomenon. A sharp increase in remittances from overseas Pakistani workers, entries under Roshan Digital Accounts (RDA) by non-resident Pakistanis, and a pickup in export earnings are expected to help the rupee regain some of the ground lost in the days and weeks to come.

Abbas predicts that “the Pakistani currency will close somewhere around Rs 155-156 against the US dollar at the end of the current fiscal year on June 30, 2021.”

It could however depreciate to around Rs160 by December 31, 2021, he said.

Abbas said it was no longer a controlled currency market and that the rupee-to-dollar exchange rate was determined by market forces taking into account the demand for and supply of foreign currencies.

“We hope that workers’ remittances will remain stable in the months to come. The entries will help the rupee to regain its value, ”the analyst said.

However, over the next few days the rupee could remain under pressure for a number of reasons, including a rebound in international oil prices, with benchmark Brent crude reaching a two-year high of around $ 73 a barrel.

Pakistan relies heavily on imported energy supplies to meet local demand, which has steadily increased.

Abbas said Pakistan’s trade deficit had widened due to a continued increase in imports. Imports are expected to increase further after the end of the current third wave of the Covid-19 pandemic in Pakistan.

This time around, however, the surge in imports will not have a negative impact on the current account deficit in the next fiscal year starting July 1 due to increased remittances and a rebound in exports. . The current account balance was in surplus at around $ 750 million in the first 10 months (July-April) of the outgoing fiscal year.

Gold bounces back

“The strengthening of the US dollar in the international market has helped gold rebound around the world. As a result, the precious metal has also won in Pakistan, ”said Haji Haroon Chand, president of the All Sindh Saraf Jewelers Association (ASSJA).

The US dollar appreciated following the announcement by the US central bank to raise the interest rate later and stop pumping billions of dollars into its economy sooner than earlier expected, Did we learn.

Posted in The Express Tribune, June 22sd, 2021.

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