Rupee depreciates by 18 paisa against US dollar; PSX loses 777 points

The SBP let the rupee depreciate significantly in the inter-bank market.

KARACHI (Dunya News) – The Pakistani rupee on Monday slipped to Rs157.70 against the US dollar after losing 18 paisa in the interbank market during the early trade hours.

Ahead of Eidul Azha and in the first month of July of the current fiscal year 2019-20, Pakistan received higher remittance inflows from overseas Pakistanis – which in turn assisted the local currency in recovering against the greenback.

Currency traders were of the view that the increasing inflows of remittance in connection with Eidul Azha had supported the local rupee in the market. According to them, the majority of inflows had come from Saudi Arabia and other Gulf countries, including the United Arab Emirates (UAE).

In the earlier weeks, the rupee had been observed to cumulatively depreciate against the greenback, which in turn had resulted in increased prices of goods and hardships for the general public.

The SBP let the rupee depreciate significantly in the inter-bank market after finalising an agreement with the International Monetary Fund (IMF) for a loan programme on May 12.

The IMF has asked Pakistan to end state control of the rupee and let the currency move freely to find its equilibrium against the US dollar.

On the other hand, the World Bank Group has also supported the idea of leaving the rupee free from state control in an attempt to give much-needed boost to exports and fix a faltering economy.

In previous weeks, the local currency depreciated massively despite receiving the first tranche of $991.4 million from the International Monetary Fund (IMF).

The stringent conditions – on which the global moneylender has formally approved the bailout package of $6 billion for Pakistan – seem to have exerted more pressure on the local currency.

The gradual drop in the rupee had come due to high demand for the dollar against thin supply as the country continued to make aggressive international payments to partially pay off huge foreign debt and for imports.

Economists are of the view that effective measures must be implemented on the priority basis to recover the state from the balance of payment deficit.

Besides increased demand of the greenback in the local market, they have termed ‘balance of payments deficit’ as the main reason in the recent hike in the value of the US dollar.

Moreover, they consider that state’s exports and investment are required to grow significantly, and the imports must be reduced to remove pressure on the local currency.

According to experts, the government must ensure implementations on economic policies after the deal with the IMF.

It is anticipated that the US dollar rate would fluctuate for some time, and the value of the Pakistani rupee would stabilise after proper implementation of the economic policies.

PSX loses 777 points

On the other hand, Pakistan Stock Exchange (PSX) witnessed a negative trend on Monday when the benchmark KSE-100 index lost 777 points and dropped to 30,572 points. 

In the previous week, the KSE-100 index gained massive 2,585 points to close at 31,350 points.

Hovering in the green throughout the previous week on the back of rumors that "Pakistan might exit the FATF grey list", as many as 174 million shares of indexed companies changed hands during the session. The market value of the shares traded clocked in at Rs424 billion.

Over the course of previous week, foreign investors sold a total of $4900,000 worth of shares.

Earlier, the recent simmering tensions between nuclear-armed Pakistan and India over Kashmir dispute had pushed investors to adopt cautious behaviour in the trading.

Moreover, since the passage of the financial budget for the fiscal year 2019-20, the stringent policies had been reflecting themselves in the downfall of the stock market.

According to a JS Global report, "The local bourse closed positive on the rumors that Pakistan might exit the FATF grey list." Market analysts are expecting a positive momentum at the bourse in the days to come.