KARACHI (Dunya News/News Desk) – The Pakistan rupee is continuing with the latest slide as the US dollar was up by another 69 paisa in early trading on Monday, which translates in a net appreciation of Rs8.17 since halting the local currency’s surge in Oct 17.
It means the greenback was being traded for Rs285 in official exchange rate against the level of Rs276.83 recorded on Oct 16 after the rupee had bounced back from Rs307.10 – the record low in Pakistan’s history.
Last month, the State Bank of Pakistan’s Monetary Policy Committee had decided to maintain the interest rates to the current record-high level of 22pc despite the signs of an easing inflation, making many in the market to expect a rate cut.
The rupee is under pressure amid a high demand – described by many as a return of market speculation after the short-lived government crackdown – as the International Monetary Fund (IMF) is pressing ahead with its demand to meet all the conditions required under the $3 billion stand-by arrangement.
Meanwhile, the latest rupee depreciation coincides with the IMF team’s demand to provide the latest data about the financial status of state-owned enterprises amid the pressure to sale these loss-making entities.
Read more: Privatisation: IMF demands latest data of state-owned enterprises
Hence, this scenario is creating uncertainty as experts believe that even the release of the second tranche after a successful first review won’t improve dollar supply.
The IMF has been adamant to stick with the criterion of market determining the currency exchange rate, thus closing the door for any government intervention to boost the local currency.
MARKET MANIPULATION OR ECONOMICS?
As the dollar is making gains against the rupee in Pakistan since Oct 17, it isn’t the case elsewhere.
On Monday, the US dollar extended its decline, having fallen by the most since July last week after the Federal Reserve dialled down its hawkish rhetoric and US data showed signs of moderation.
The dollar index eased 0.2 per cent to 104.85, its lowest level in 6-1/2 weeks, after falling 1.4pc last week. Hence, the euro gained 0.2pc to a 7-1/2 week high of $1.0756.
"We always say bad news is good news," said Tina Teng, a market analyst at CMC Markets in Auckland. "So it's good then there is expectation for the Fed and other central banks to end the rate hike cycle sooner."
She expected the dollar to remain on a weaker trend through November.
JPMorgan analysts say a sustained dollar selloff would need signs of improvement in the euro zone, China and other regions which it says are "still tenuous".
Meanwhile, the Japanese yen slipped 0.1pc to 149.47 per dollar. It hit 151.74 per dollar last week, edging close to last October's lows that spurred several rounds of dollar-selling intervention by the Bank of Japan.
Sterling was up 0.3pc at $1.2414. Britain's GDP data for the fourth quarter is due this week and, while the pound rallied strongly last week in a market that is heavily short the currency, it is still down about 5.5pc since a July peak.