Business

Rupee to remain under pressure next week as dollar demand grows

Published

9 months ago

Farwa

Import backlogs and dividend payments will lead to more pressure.
Market bracing for the rupee to cross past the historic level of 300.
There are fears interim caretaker setup will be in place for a long.

KARACHI: The Pakistani rupee is expected to remain under pressure during the next week due to an increase in dollar demand as a result of the clearing of import backlogs and dividend payments, traders said, according to The News.

Fears that the caretaker administration will be in place for a long time and that this year’s elections may not be held as planned are likely to weigh on sentiment towards the rupee.

The rupee fell by 1.46% this week against the dollar in the interbank market. The rupee’s value against the dollar was 291.51 on Monday, but it fell further to end the week at 295.78 on Friday.

“The rupee is expected to continue to decline in the coming days due to the demand for dollars created by the release of delayed import and dividend payments,” a foreign exchange trader told The News.

“The import restrictions have been eased in line with the requirements of the International Monetary Fund. There was a backlog of payments before the IMF’s stand-by arrangement because there were not enough foreign exchange reserves,” the trader added.

The market is driven by supply and demand, with no intervention from the central bank, according to the trader.

The State Bank of Pakistan said in its July monetary policy statement that the “market-determined exchange rate will continue to serve as the first line of defense against external shocks and support reserve build-up”.

However, Pakistan’s current account balance ended its four-month streak of surpluses in July with a deficit of $809 million. Increased imports were the main reason.

The foreign exchange reserves held by the SBP slightly rose by $12 million to $8.05 billion in the week ending August 11.

The market is bracing for the rupee to cross past the historic level of 300 per dollar, said Tresmark in a client note on Saturday.

“This appears to be the market consensus,” the firm said.

“However, in our opinion, there is a material likelihood of an ad hoc hike in interest rates, which may relieve some pressure off the rupee. Essentially, we expect the rupee to trade the coming week under the 300 level,” it added.

“Our view also factors in the increase in swaps, which depicts healthy liquidity levels, and micro-management of imports, and is based on the premise that a weak rupee will further exacerbate the inflation problem.”

A quick analysis of the last five interim governments shows that the local currency has depreciated every time, with an average of about 6%, according to Tresmark.

The currency also depreciated, every time, in the first three months that the newly elected government came in, averaging about 3%.

“Whereas interest rates increased by an average of 80 basis points in the interim government phase, but stayed largely stable in the first 3 months of elected government,” the firm noted.

Business

Pakistan’s gold prices are still declining; see the most recent

Published

1 day ago

Farwa

The price of 10-gram gold reduced by Rs943 to settle at Rs207,733, while the price of gold dropped by Rs1200 to close at Rs242,300 a tola, according to the Sindh Sarafa Jewellers Association.

In the global market, the price of the precious metal fell by $10 to $2,349 per ounce, resulting in losses.

At 04:48 GMT, the spot price of gold had dropped by 0.2% to $2,354.77 per ounce. In the previous session, prices reached a two-week high.

American gold futures dropped 0.6% to $2,361.

Spot silver decreased by 0.4% to $28.03 per ounce, while palladium remained steady at $978.03 and platinum decreased by 0.1% to $992.89.

Business

Pakistan and the IMF begin talks for a new loan.

Published

1 day ago

Farwa

Pakistan is requesting a $6 to $8 billion bailout package from the international lender over the next three to four years to address its financial troubles.

A mission team led by Nathan Porter, the IMF’s Mission Chief in Pakistan, is meeting with a Pakistani delegation led by Finance Minister Muhammad Aurangzeb.

According to sources familiar with the situation, Islamabad may face more difficult options, such as raising power and gas bills.

Mr. Aurganzeb informed the IMF team that the country’s economy has improved as a result of the IMF loan package, and Islamabad is ready to sign a new loan programme to further develop.

The IMF mission expressed satisfaction with Islamabad’s efforts to revive the country’s struggling economy.

The IMF praised Pakistan’s economic growth in its staff report earlier this week, but warned that the outlook remains challenging, with very high downside risks.

The country nearly avoided collapse last summer, and its $350 billion economy has stabilized since the end of the last IMF program, with inflation falling to roughly 17% in April from a record high of 38% last May.

Business

Petrol prices are likely to drop significantly beginning May 16.

Published

1 day ago

Farwa

According to sources, the government is set to decrease petrol prices by Rs 14 per litre and diesel prices by Rs 10 on May 16 for the next fortnight’s revision.

Last month, the government reduced the price of fuel and high-speed diesel by Rs5.45 and Rs8.42 per fortnight, respectively.

The current fuel price is Rs288.49 per litre, while the HSD price is Rs281.96.

Meanwhile, oil prices fell further on Monday, as signs of sluggish fuel consumption and comments from U.S. Federal Reserve officials dimmed optimism for interest rate reduction, which may slow growth and reduce fuel demand in the world’s largest economy.

Brent crude prices down 25 cents, or 0.3%, to $82.54 a barrel, while US West Texas Intermediate crude futures fell 19 cents, or 0.2%, to $78.07 per barrel.

Oil prices also declined on signals of poor demand, according to ANZ analysts, as gasoline and distillate inventories in the United States increased in the week before the start of the driving season.

Refiners throughout the world are dealing with falling diesel profitability as new refineries increase supply and warm weather in the northern hemisphere and weak economic activity reduce demand.