The honeymoon period for the rupee seemed to be over on Monday when the US dollar reversed its trajectory after seven days of continued depreciation against the local currency.
Currency dealers in the interbank market and the State Bank of Pakistan (SBP) reported the closing price of the dollar at Rs182.54, a rise of 99 paise from Saturday’s Rs181.55.
“The greenback will gain more in coming days since the rising international oil price is strengthening the US dollar against all currencies,” said Abid Sattar, a currency dealer in the interbank market.
Currency experts said the political crisis in Islamabad was the real cause of a sharp and quick increase in the dollar prices as it hit the peak of Rs188.18 on April 7. However, the recovery of the rupee was a temporary phenomenon after the elimination of the speculative environment. The rupee witnessed the biggest historic recovery of Rs3.50 to Rs184.68 from Rs188.18 against the dollar last Friday.
He said the prolonged Russia-Ukraine war has strengthened the dollar while crushing the small economies like Sri Lanka.
Pakistan is also feeling the pinch of high oil and other commodity prices on the international market which pushed up the country’s import bill as a result the trade deficit widened by 49pc in FY22 so far.
“The expected rollover of $2.4bn loans by China could provide a temporary support to the exchange rate but there is no chance for recovery of rupee for a longer period,” said Aamir Aziz, who exports textile finished products to Europe.
He said what is more killing is the increased prices of shipping lines which eroded the profits of the exporters. “The shipping lines have increased freight charges by nine times during the last two years,” he remarked.
“It is very hard to compete on the world markets in the backdrop of costly freight, high oil and commodity prices,” he said, adding that the high demand for dollars from importers would keep the local currency under pressure.
The external accounts of the ousted government were the weakest in FY22 since both the trade and current account deficits widened unprecedentedly. The current account deficit during July-Feb rose to $12bn while the reserves of the State Bank of Pakistan fell to $10.85bn till April 8.
Despite record inflows of remittances in March ($2.8bn) the country still requires up to $15bn to meet the foreign obligations, mainly debt servicing of both short-term commercial loans acquired from donor agencies and countries.