Rupee gains 20 paisas against dollar

KARACHI: The rupee gained 20 paisas against the dollar on Wednesday after an ease down in the political uncertainty coupled with the central bank’s measures to provide support to the local currency, dealers said.

The exchange rate closed at Rs181.82 against the greenback from the last day’s closing of Rs182.02 in the interbank foreign exchange market.

The local currency recovered, amid the recently introduced policies by the State Bank of Pakistan (SBP) and the clarity on the domestic political landscape.

On April 7, 2022, the central bank announced a massive 250 basis points increase in the key policy rate to 12.25 per cent from 9.75 per cent.

The announcement was made in an emergency meeting of the Monetary Policy Committee (MPC), where the State Bank said that the rupee depreciated around 5 per cent against the dollar since the last policy announcement.

The SBP also imposed 100 per cent cash margin on 177 items to curb their imports, which also lent some support in easing pressure on the rupee and reducing the twin deficits, the dealers added.

The rupee hit the historic low of Rs188.18 on April 7, as the country faced the worst political crisis, resulting in uncertain economic conditions.

The slump in the value of the rupee was due to a significant decline in the foreign exchange reserves of the country.

The forex reserves declined around 36 per cent during the last seven months. The country’s foreign exchange reserves hit an all-time high of $27.23 billion on August 27, 2021 and fell to $17.47 billion by the week ended April 1, 2022.

The ever-widening current account deficit, volatile global commodity prices after Russia, one of the biggest oil and gas producer countries, went on a war with Ukraine, also played their part in the rupee depreciation.

The ballooning current account deficit is another reason for escalation in the value of the dollar. Pakistan’s current account deficit ballooned to $12 billion during the first eight months (July-February) 2021/22 against a surplus of $994 million in the corresponding months of the last fiscal year.

Although the current account deficit narrowed to $545 million in February 2022, compared with the deficit of $2.53 billion in January 2022, the scheduled external repayments are still a threat to the balance of payments position.

The local currency remained under pressure since the start of the current fiscal year.

It lost Rs24.28, or 15.41 per cent, from Rs157.54 to a dollar on June 30, 2021 to the current level of Rs181.82.

At the open market, the buying and selling of the dollar was recorded at Rs182 and Rs184 at 3:15pm PST.