Dollar soars past Rs208 in Pakistan interbank trade

The US dollar continued to extend gains on Friday in Pakistan as it crossed Rs208 during early morning trade in the interbank market — a trend analysts attribute to a delay in the deal with International Monetary Fund (IMF) and rapidly depleting foreign exchange reserves.

According to the Forex Association of Pakistan (FAP), the greenback appreciated by 80 paisa from yesterday's close of Rs207.75 and rose to Rs208.55. It had appreciated by Rs1.45 on Thursday, reports The Dawn

The rupee has been consistently losing ground since the week began which has worried investors and is creating frustration among the stakeholders of the economy.

Malik Bostan, chairman of the Forex Trade Association, outlined three main reasons for the pressure on the rupee: the stalled IMF deal, weakening reserves and delay in the rollover of funds worth $2.5 billion from China.

He said that money sent by overseas Pakistanis has declined by $50 million in the last few months.

He also said the increased demand for foreign currency could be due to vacationing Pakistanis. "The government should stop people from going abroad for vacations because that increases the demand for foreign currency in the market."

Bostan further stated that the soaring global oil prices posed a danger to the rupee and suggested measures put in place to reduce fuel consumption. He added that this could be achieved by imposing a fuel quota on gas-guzzling vehicles.

FATF outcome

On the other hand, Saad Bin Naseer, director of Mettis Global, told Dawn.com that the rupee was under pressure today in anticipation of the ongoing plenary sessions of the Financial Action Task Force (FATF) — a global task force for combating money laundering and terrorist financing.

The international watchdog will hold a press conference today to announce the country's progress so far in fixing deficiencies in its counter-terror financing and anti-money laundering regimes.

Naseer further highlighted that oil-related payments added further pressure on the rupee today.

US interest rate affecting currencies

Meanwhile, Mettis Global quoted Arif Habib Group's Ahsan Mehanti as saying: "The demand for dollar is high against almost all major currencies because of the Fed's decision to increase the policy rate by 75bps.

"Resultantly, rupee also took a beating against the dollar," he said. On Wednesday, the Federal Reserve announced the most aggressive interest rate increase in nearly 30 years, raising the benchmark borrowing rate by 0.75 percentage points to battle surging inflation.

Besides, Mehanti pointed out, the export market has become very confined for Pakistan.

"It is said that exporters remain in the sweet spot due to rupee depreciation but in the present scenario, exporters can not reap the due benefits owing to the Russia-Ukraine tension," the analyst added.