KARACHI: The rupee closed slightly lower in the interbank market on Monday, as investors awaited directions from the upcoming budget and monetary policy announcement following a better-than-expected inflation reading in May.
The rupee ended at 278.36 per dollar, slightly weaker from Friday’s close of 278.32.Currency dealers said that the rupee weakened slightly due to increased demand for the US dollar for imports and other payments, which typically pick up in June.
“The market is eagerly waiting for the 2025 budget and the subsequent monetary policy review meeting,” a dealer said.“These events will help investors make long-term decisions about the currency. However, there is concern that expected higher imports and other payments this month could put pressure on the rupee,” the dealer added.
According to the latest official figures, Pakistan’s imports of goods reached $4.902 in May, a year-on-year rise of 13.9 per cent. In May, there was a 1.2 per cent month-on-month increase in imports. Nonetheless, during the first 11 months of the fiscal year 2024, imports decreased by 2.4 per cent to $49.802 billion.
Pakistan’s consumer price index inflation fell to 11.76 per cent in May, the lowest in almost two-and-a-half years, according to data released by the Pakistan Bureau of Statistics (PBS) on Monday. Inflation clocked in at 17.3 per cent in the previous month.
“With this blowout figure we see KIBOR [Karachi Interbank Offered Rate] & Swaps coming under pressure. We may see the dollar gaining 40-50 paisa this week. The market will now be factoring in a minimum 200bps rate cut later this month. Suppressed petrol prices and a non-inflationary budget may sustain the downtrend in inflation,” said Komal Mansoor of Tresmark.In the open market, the rupee dropped by 8 paisas to close at 279.54 against the dollar, compared with 279.46 in the previous session.