The Pakistani rupee fell 94 paisas versus the dollar on Friday as the market reopened after four days of Eid-ul-Fitr-related festivities.
On the interbank foreign currency market, the local unit slipped 94 paisas to settle at Rs186.63 per dollar, compared to Saturday’s closing rate of Rs185.69 per dollar.
The traders said that when the market reopened after the Eid holidays, the value of the local currency went down because there was a lot of demand for the dollar to pay for imports and raise commodity prices on other markets.
In recent months, the country’s foreign currency reserves have been under severe strain due to rising global commodity costs and volatile global oil prices.
Pakistan is a net importer of petroleum products, hence, any change in petroleum product prices has an immediate impact on the country’s import bill.
As a result of the European Union’s imposition of a restriction on oil imports from Russia in the midst of the Russia-Ukraine conflict, worldwide oil prices also increased significantly. On Thursday, the benchmark Brent oil price held at $112 per barrel.
Depleting foreign exchange reserves continue to pose the greatest threat to the stability of the rupee. Foreign currency reserves in the country have gone down by $377 million in the week ending on April 23, according to the government.
In the last month, Pakistan’s total liquid foreign reserves fell from $17.045 billion to $16.668 billion, the State Bank of Pakistan said.
Due to foreign debt and other payments, the State Bank of Pakistan’s reserves decreased by $328 million to $10.55 billion, the central bank said.
On April 7, the local currency fell to a record low of Rs188.18 because of the country’s political turmoil and uncertain economic prospects, which caused the currency to fall.
The rising current account imbalance is another factor contributing to the appreciation of the dollar. During the first eight months (July–February) of the fiscal year 2021/22, Pakistan’s current account deficit soared to $12 billion, from a surplus of $994 million in the equivalent period of the previous fiscal year.
Since the start of this fiscal year, the local currency has been under pressure. The rupee depreciated by Rs28.15, or 18.46%, from Rs157.54 per dollar on June 30, 2021, to its present value of Rs186.63.
At 4:30 p.m. PST, the buying and selling rates of the dollar on the open market were Rs. 185.5 and Rs. 186.5.