Rupee weakens to six-week nadir amid dollar supply crunch

KARACHI: The rupee weakened to its lowest level in six weeks on Wednesday, as importers bought more dollars to meet their payments and exporters held back their foreign currency earnings, dealers said.

The rupee closed at 286.90 per dollar in the interbank market, down 0.18 percent from Tuesday’s close of 286.39, according to the State Bank of Pakistan. It was the lowest level since Sept. 28, when the rupee touched 287.00.

In the open market, where the rupee trades more freely, the currency was unchanged at 287.50 per dollar. According to traders, the rupee has been under pressure for the thirteenth day in a row because importers are making significant dollar demands.

"The market is lacking dollar liquidity as a result of exporters' reluctance to sell dollars. This, along with rising demand for dollars from importers, continued to put pressure on the rupee," said a foreign exchange trader.

Speculative activities are also blamed for the rupee's fall. Reports indicate that illegal currency markets, offering a more favorable exchange rate than official ones, are making a comeback in Afghanistan's border regions.

In an attempt to gain insight into the future direction of the rupee, traders are keeping an eye on Pakistan's ongoing loan review negotiations with the International Monetary Fund. Nonetheless, they anticipate the rupee to stabilize at the 286 levels in the coming days based on the action in currency prices on Wednesday.

A few encouraging events have occurred, which may bolster optimism regarding the rupee. Brent crude dipped 54 cents to $81.07 a barrel, while US crude lost 56 cents to $76.81. On Tuesday, both had fallen to their lowest level since July 24.

Media reports said Pakistan is seeking $600 million in fresh loans from two Chinese banks to close a significant financing gap. The country also hopes that the IMF loan review talks will be successful, which will help boost its credit rating and enable it to borrow from non-Chinese foreign banks.