For the sixth consecutive session Pakistani rupee continued to fall against the US dollar, settling with a 1.21% depreciation on the week’s last trading day as predictions of greater trade deficit kept the currency under pressure.
According to the State Bank of Pakistan (SBP), the rupee closed at 228.18 after declining by Rs2.76 against the greenback. During the six trading sessions, the rupee cumulatively declined by Rs9.58 or 4.2% against the US dollar.
— SBP (@StateBank_Pak) September 9, 2022
On Thursday, Pakistan’s rupee had sustained a fifth successive loss to settle at 225.42 after depreciating 0.82% or Rs2 against the greenback.
The drop comes despite the State Bank of Pakistan’s total liquid foreign exchange reserves increasing by $1.103 billion to $8.799 billion during the week ended September 2, 2022.
According to analysts, while an increase in the country’s liquidity position could support the rupee, import payment pressures and a higher priced dollar would continue to put pressure on the rupee.
Read more: Where are the dollars going?
According to the market analyst, the situation will improve as Pakistan receives inflows in the form of flood assistance, which would relieve pressure on the local currency.
Globally, the dollar took a breather from its surging rally on Friday as markets digested yet more hawkish Fed speak, while the euro clung to parity, aided by an outsized rate hike from the European Central Bank.
The US dollar index fell 0.25% to 109.25, just below a 20-year high of 110.79.
Meanwhile, oil prices, a crucial indicator of currency parity, increased on Friday, bolstered by real and looming supply cutbacks, while crude was set for a second weekly fall as aggressive interest rate hikes and China’s COVID-19 limitations weighed on demand.
Moreover, the large-scale destruction by recent floods and rains which have caused massive loss of crops, livestock, bridges, and roads, and the displacement of 30 million people, is hampering the rupee’s recovery as the country’s exports are bound to suffer and the country has to bear enormous rehabilitation expenses.