The Pakistani currency hit a two-week low at Rs167.33 against the US dollar in the inter-bank market on Friday as demand for the foreign currency surged following overseas investors pulled out short-term investment from government securities and petroleum oil prices surged in global markets.
The rupee lost ground in the past couple of days. It was just Rs0.85 away from an all-time low of Rs168.18 against the greenback recorded on June 29.
Foreign portfolio investors withdrew $26 million from government securities (T-bills) the other day, the SBP reported on Friday.
“The outflow from T-bills has primarily mounted pressure on the rupee (against the US dollar),” Pakistan Kuwait Investment Company (PKIC) Head of Research and Development Samiullah Tariq said while talking to The Express Tribune.
More importantly, the central bank was building the foreign currency reserves instead of supplying dollars in the inter-bank market. “The development has also increased pressure on the rupee,” he said.
Besides, the uptrend in international petroleum and cooking oil prices also contributed to the weakening of local currency in recent days. “Local and global economies are reopening. The development will result in increased import of petroleum and cooking oil,” he said.
Pakistan is also set to import wheat in coming days to bridge the demand-supply gap and stabilise wheat flour prices in the country.
Tariq, however, said wheat import would require a nominal amount and was not a major cause behind the rupee’s downtrend.
Earlier this week, Fitch Solutions anticipated the rupee to maintain its downward trend in the short to long run due to the country’s growing foreign debt and anticipated inflationary pressures.
It forecast that the rupee would weaken to an average of Rs163 against the US dollar in calendar year 2020 and to Rs171.15 in 2021.
Gold hits record high
The downward trend in the rupee pushed gold price to a new all-time high at Rs109,650 per tola (11.66 grams) on Friday.
The All Sindh Saraf Jewellers Association (ASSJA) reported an increase of Rs300 per tola in the commodity’s price in local markets despite no change in the world market and its price remained pegged at Thursday’s level of $1,806 per ounce (31.10 grams).
The increase in the yellow metal’s price in Pakistan is apparently due to depreciation of the rupee against the US dollar as Pakistan imports the commodity to meet local demand.