Rupee weakens by 53 paisa against US dollar
The IMF asked Pakistan to end state control of the rupee and let the currency move freely.
KARACHI (Dunya News) – The Pakistani currency depreciated against the US dollar in the interbank market by 53 paisa and hit Rs156.70 during the early trade hours on Monday.
However, in the last two months, the local currency was observed to significantly recover against the greenback in both interbank and open markets as the open market follows the similar trend.
Analysts fear that the intense ongoing trade war between the United States and China would result in fluctuation of the U.S. dollar in the local market, and the value of the Pakistani rupee would stabilise depending on the measures taken by the government with appropriate economic policies.
Currency traders were of the view that the increasing inflows of remittance in have supported the local rupee in the market.
In the earlier weeks, the rupee was 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 has 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 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.
After the International Monetary Fund (IMF) lent the first tranche of $991.4 million to Pakistan, the local currency had depreciated massively.
The stringent conditions – on which the global moneylender has formally approved the bailout package of $6 billion for Pakistan – seemed 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 were 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 had termed ‘balance of payments deficit’ as the main reason in the recent hike in the value of the US dollar.
Moreover, they had considered that state’s exports and investment were 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.
PSX observes bullish trend
On the other hand, the Pakistan Stock Exchange (PSX) witnessed an upward trend on Monday with the benchmark KSE-100 index gaining 227 points and settling at 32,298 points, Dunya News reported.
On Friday, PSX shares rose by Rs80 billion with a significant average trading volume before market closure.
According to analysts, financial firms made such investments in stocks due to lower prices of shares of different companies registered with the PSX.
According to stock market analysts, despite recent simmering Pak-India tensions and the current uncertain political situation in the country, investors have shown interest in the stock market due to a likely fall in interest rates.
Earlier, economists were of the view that since the passage of the financial budget for the fiscal year 2019-20, the stringent policies would reflect themselves in what they termed “the downfall of the stock market.”
