Rupee recovers 4.70 to end falling streak against dollar

Rupee recovers 4.70 to end falling streak against dollar

Shahnawaz Akhter
June 23, 2022

Rupee recovers 4.70 to end falling streak against dollar

Rupee recovers against the dollar.
The market responded positively to a deal between Pakistan and IMF.
The current account deficit skyrocketed to $13.78 billion.

KARACHI: The rupee rebounded sharply by 4.70 against the dollar on Thursday to end its nine-day falling streak, dealers said.

The exchange rate gained Rs4.70 to end at Rs207.23 against the greenback from the previous day’s closing of Rs211.93 in the interbank foreign exchange market.

The local currency witnessed the historic low of Rs211.93 on June 22, 2022.

The dealers said the expected inflows of around $2.3 billion from the Chinese consortium banks had resulted in positive sentiment in the market. Besides, the falling oil prices in the international market also pushed the rupee value upwards.

The market also responded positively to the expected deal between Pakistan and the International Monetary Fund (IMF), as the government authorities had agreed to many tough conditions, including revision of the federal budget targets.

The foreign exchange reserves of the State Bank of Pakistan (SBP) are the major reason to keep the rupee under pressure.

The official foreign exchange reserves of the central bank fell $241 million to $8.985 billion by the week ended June 10, 2022, compared with $9.226 billion on June 3, 2022.

The current level of the SBP’s forex reserves showed that the central bank has import cover for around one month only.

Pakistan’s import bill for May 2022 was recorded at $6.777 billion, according to the Pakistan Bureau of Statistics.

The latest foreign exchange reserves of the SBP showed it fell to around 2½ years low. Previously, the foreign exchange reserves held by the central bank were seen at $9.233 billion on December 6, 2019.

The foreign exchange reserves held by the central bank witnessed a record high of $20.146 billion by the week ended August 27, 2021. Since touching the peak, the SBP’s foreign exchange reserves witnessed a continuous decline. The official forex reserves of the SBP fell around $11.16 billion by the week ended June 10, 2022 from touching the peak on August 27, 2021.

Import payments demand is also putting a constant pressure on the local currency. The import bill of the country sharply increased 44.51 per cent to $77.29 billion during July-May 2021/22, compared with $50 billion in the same period of the last fiscal year. This resulted in widening of the trade deficit by 58 per cent to $43.42 billion during the first 11 months of the current fiscal year, compared with the deficit of $27.45 billion in the same period of the last fiscal year.

The current account deficit of the country also ballooned to $13.78 billion during July-April 2021/22, compared with the deficit of $543 million in the corresponding period of the last fiscal year.