The Pakistani rupee snapped its three-day losing streak and slightly rebounded on Wednesday against the US dollar in the interbank market during intraday trade.
However, it was trading above 202 threshold. The rupee was trading at 202.50 against the greenback in the interbank market as of 1:21 pm.
AA Commodities Director Adnan Agar said that the market sentiment is negative due to uncertainty regarding the ongoing financial crisis.
He said that the market is volatile as investors are reacting to all developments regarding the upcoming budget, the International Monetary Fund (IMF) programme, and other economic indicators.
“The investors are concerned about the economic situation and the delay in decisions by the new coalition government,” he said.
Agar said that the currency is expected to remain volatile as oil prices are rising in the international market meanwhile, the government is expected to increase taxes in the upcoming federal budget for the next fiscal year 2022-23 which will increase inflation.
A day earlier, the local currency shed Rs2.77, or 1.37%, to close at an all-time low of Rs202.83 surpassing its previous record low of Rs202 recorded on May 26.
Moreover, for the first time in its history, the rupee made a historical drop of Rs4.00 in a single day on Tuesday and surpassed Rs204 threshold against the greenback in the interbank market during the intraday trade.
The recent bearish spell began after the government hiked the price of petroleum products by a major Rs60 per litre as a result of removing subsidies — one of the main demands of the money lender.
The analyst also highlighted that the price of petrol is expected to increase to Rs250-260 per litre which would negatively affect the rupee-dollar parity.
Traders believe caution is expected this week ahead of the unveiling of the federal budget for the fiscal year 2022-23 scheduled to be announced on June 10, with investors expecting IMF conditions of fiscal consolidation to dominate.
“The rupee opened at 201.50 today and suddenly went down to 199.40, recovering within 30 minutes to trade at 201.20,” Exchange Companies Association of Pakistan (ECAP) General Secretary, Zafar Paracha, said.
“There is no sense of this volatility. This is causing discomfort in the market, shaking the confidence of importer, exporter and foreign investors,” he added.