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Rupee slides against dollar in interbank market

Rupee slides against dollar in interbank market

KARACHI: The Pakistani rupee dropped against the dollar on Wednesday, owing to a faltering economy and a rise in the political heat, keeping the investors’ on the sidelines, dealers said.

The exchange rate shed 39 paisas against the dollar to reach Rs223.81 from the previous day’s closing of Rs223.42 in the interbank foreign exchange market.

Currency experts said that the rupee reported losses against the greenback despite a massive decline in Pakistan’s default risk as the inflows dried up coupled with political uncertainty which is hard hitting the investors’ sentiments.

Additionally, the negotiations with the International Monetary Fund (IMF) were delayed for the ninth review amid a lack of clarity on flood-related financial requirements for this fiscal year and declining revenue stream in the wake of import controls.

The net foreign direct investment (FDI) in Pakistan slumped 62 per cent to $95 million in October 2022, compared with $247.3 million in the same month last year. However, the net FDI was up 13 per cent, compared with $84 million recorded in September 2022.

During the first four months of fiscal year 2023, the net FDI dropped 52 per cent year-on-year to $348 million, compared with $726 million during the same period of last fiscal year.

The workers remittances have also declined 15.7 per cent to reach $2.21 billion in October, compared with $2.62 billion in the same month of the last year.

On a monthly basis, the remittances witnessed a decline of 9 per cent, compared with $2.43 billion received during September.

The country’s benchmark 5-year Credit Default Swap (CDS) dropped significantly on November 22, by a significant 5,224 basis points to 71.64 per cent. The instrument has chopped off over 52 percentage points in a single day.

On the flip side, the political conditions have remained tense as Pakistan Tehreek-e-Insaf Chairman Imran Khan asked workers to reach Rawalpindi on November 26.

The announcement came amidst the ambiguity surrounding the appointment of a new army chief as the government has so far failed to clear its position on the matter.

Global oil prices fell by more than $1/barrel as the Group of Seven (G7) nations considered a price cap on Russian oil above where the crude grade is currently trading.

Both contracts soared by more than $1/barrel earlier in the day but slipped back following reports that the G7 price cap on Russian oil could be higher than the current level.

Brent crude was down by 2.60 per cent at $86.06/ barrel, while the US West Texas Intermediate (WTI) was down 2.37 per cent to settle at $79.03/barrel.

The foreign exchange reserves held by the State Bank of Pakistan (SBP) witnessed an increase of $3 million to reach $7.96 billion during the week ended November 11, compared with $7.95 billion on November 4.

The country’s total liquid foreign exchange reserves rose by $75.2 million to clock-in at $13.79 billion as of November 11, up from $13.72 billion during the previous week.

The net foreign exchange reserves held by the commercial banks surged by $72.2 million to $5.83 billion at the end of last week, compared with $5.76 billion a week earlier.

The textile exports declined 15.2 per cent to reach $1.35 billion in October, compared with $1.6 billion in the corresponding month of the last year.

On a monthly basis, the exports declined 11.1 per cent with a major decline in components including cotton cloth, knitwear, bedwear, towels, and readymade garments.

The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs18.96 or 9.25 per cent from Rs204.85 to dollar on June 30, 2022 to the current level of Rs223.81.

At the open market, the buying and selling of the dollar was recorded at Rs228.75 and Rs231 at 4:45pm PST.

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