KARACHI:
Market speculation suggests that Pakistani currency may face a fresh round of devaluation under the upcoming caretaker government ahead of general elections in late 2023.
Outgoing Prime Minister Shehbaz Sharif has already announced the dissolution of National Assembly on August 9. When Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha was asked for comment to clear the smoke, he did not categorically rule out the possibility of further rupee depreciation.
“Chances of this stand low. Currency markets are working on the demand and supply mechanism,” he pointed out, adding that the currency would stabilise in the range of Rs286 to Rs289 to a dollar in the short run, say around one month.
Pakistani currency, however, improved 0.08%, or Rs0.23, to a four-day high at Rs286.97 against the US dollar in the inter-bank market on Friday, maintaining the winning streak for the second consecutive working day.
Likely political instability and too much politics ahead of polls may pile more pressure on the rupee in the coming weeks and months. All political parties should develop a consensus in order to avoid causing more damage to the economy.
Market talk suggests the rupee is stabilising around current levels in the backdrop of the latest monetary policy announcement.
The central bank has maintained its tight monetary policy, leaving the key policy rate unchanged at the historic high of 22% for the next six weeks. The high policy rate stands positive for the rupee. With Friday’s appreciation, the currency has cumulatively gained 0.81%, or Rs2.33, in the past two days, according to the State Bank of Pakistan’s (SBP) data.
In the open market, the rupee ticked up 0.17%, or Rs0.50, to Rs292 against the greenback on Friday, according to ECAP. Paracha refrained from giving any importance to the currency’s gains in the past two days, calling it a small adjustment in line with the demand and supply situation.
He said that the little improvement came after demand for the US dollar dropped or its supply increased in the inter-bank network. The currency would see big fluctuations only after large inflows and outflows of the US dollar. However, such developments were unlikely in the short run, he clarified.
Pakistani currency hit a six to seven-week high near Rs275/$ in July after the outgoing government won a new International Monetary Fund loan programme of $3 billion and the fund and friendly nations provided financing of $4.2 billion by mid-July 2023.
Earlier, the currency hit an all-time low at Rs299/$ in May in the wake of a deepening political crisis and poor law and order situation.
Gold shines
The gold pricing body announced an increase of Rs1,300 in the price of precious metal that reached Rs221,500 per tola (11.66 grams).
The increase came likely on the back of an uptick in gold demand. Otherwise, the rupee’s recovery and the drop in international gold prices should have pushed prices down in the domestic market.
Gold dropped by $4 to $1,932 per ounce (31.10 grams) in the global market.
Published in The Express Tribune, August 5th, 2023.
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