Pakistani currency depreciated by 36 paisa in today’s session as it closed at PKR 169.03 rupee. The rupee has experienced a drop in the second consecutive session as it closed at PKR 168.68 previously on Wednesday.
Pakistani rupee recorded an intraday high offer of RS 169.09 and an intraday low bid of PKR 168.80, trading within the range of just 43 paise per USD.
Former Treasury Head at Chase Manhattan Asad Rizvi commented,” While the domestic unit takes a breather, but the threat still looms, as demand is not subsiding. The big question is how many monetary tools are left in SBP’s sleeves to defend PKR? How much Fiscal tightening is needed?” Sharing his thoughts on the existing conditions he added, “In my opinion, minus IMF it is still manageable.”
As per his recent tweets, the cut-off yield in Wednesday’s T-bills auction matched the forecasted numbers. The three and six-month yields had increased by 40bp and 49bp respectively. Although inflation rates are projected to stay under 9% for the year-end in December 2021, the financial market has picked up on the switching up of the Central Bank’s policy stance he explained.
Bank’s Treasury expressed concerns that there is insufficient information and indications in the July forward guidance. They believe that SBP could have provided some indicators pertaining to the change in policy in its OMO injections worth PKR 2.1 trillion. It is concerned about the Bank’s GOP holdings, where the stock’s worth is PKR 12.5 trillion.
The Bank has heavily invested in a market that seems illiquid at the moment which hints at P&L experiencing a hit in case the rise in yields continues.
“The timing of HIKE is very awkward and risky because in the last quarter of the calendar year banks run for fresh deposits that push rate higher. Whereas, prior to the meeting with IMF for tranche clearance, Hike, Rupee & Fiscal adjustment seen in other areas conveys an obvious message,” Asad explained.
He further said that more than dozens of T-bills, floating-rate auctions, and PIB fix till the next Policy announcement takes place. “The market is likely to bid aggressively, as GOP holdings of Rs2.1tr are OMO injection & not banks funding. But tougher times are ahead unless well managed by the CB & Fiscal Managers,” Asad emphasized.
PKR was traded at 169/170.5 per USD in the Open market. Mettis Global reported the depreciation of the local unit by 6.80% or PKR 11.48 in the fiscal year-to-date against the USD. In a similar fashion, Pakistani currency has experienced a decline of 1.57% as it weakened by 5.44% or PKR 9.19 in CY21, with the month-to-date (MTD) position.
The rupee dropped leading to the deteriorating conditions where PKR weakened by 1 paisa against EUR. It closed at PKR 197.95 at the interbank trading.
It is important to note that the rupee lost 68 paisa to the Pound Sterling and dropped to PKR 230.76 per GBP, while the previous session closed at PKR 230.07 per GBP. The overnight repo rate remained at 7.15 or 7.25% with the 1 – week rate was 7.25/7.35 percent.