Rupee hits 8-month low

KARACHI: The rupee dipped to its lowest level in eight months on Monday amid a sharp increase in import payments, while remittance inflows remained dry because of Eid holidays in the Middle East and a shortened weekend in Pakistan, dealers said.

In the interbank market, the rupee weakened 0.95 percent to 161.48 per dollar at close, its lowest since November 2020. Dealers said the local unit continued its downward trend and lost by Rs1.54 during the session due to the rising demand for dollars from importers to make payments. “One of the main reasons for the high demand of payment is the only two working days this week. Also Middle Eastern and western countries are closed from Monday, which means no remittances or export receipts this week,” said a currency dealer.

Traders expect that rupee would appreciate gradually after Eid-ul-Azha holidays, and would be traded in between 159 and 160 levels. In the open market, the rupee ended lower at 161.50 per dollar, compared with 160.30 in the previous session. Analysts are surprised that the rupee is depreciating when fundamentals signal otherwise.

Reserves are at 4 years high, monthly remittances remained above the $2 billion mark for the whole of FY2021 and flows from Eurobonds have materialised, said an analyst at Tresmark that tracks financial markets.

The pressure on the rupee came largely from pent up imports that remained in the system and were now being released, said the report. The escalating Covid situation might also have added fuel to the fire. Rupee is expected to be strongly defended at 160 till end of July but would remain largely under pressure due to deteriorating current account deficit situation and pursuant inflation.