The exchange rate of Pakistan rupee weakened by 27 paisas against the US dollar in the interbank trading on Tuesday and closed at Rs176.18 against the previous day's closing of Rs175.91.
According to Forex Association of Pakistan (FAP), the buying and selling rates of dollar in the open market recorded at Rs176.5 and Rs177.8 respectively.
Higher oil prices has dented market sentiments as the upwards trend in commodity prices has led to a forecasting of a higher import bill, which analysts evaluate as a concerning factor.
How it fared against other currencies?
Similarly, the price of euro depreciated by 36 paisas and closed at Rs200.61 against the previous day's closing at 200.97.
The Japanese yen remained unchanged to close at Rs1.53, whereas a decline of 37 paisas was witnessed in the exchange rate of British pound, which was traded at Rs240.28 as compared to its last closing at Rs240.67.
The exchange rates of UAE dirham and Saudi riyal increased by 07 paisas to close at Rs47.96 and Rs46.95 respectively.
Volatility reduces despite uncertainty
Overall Pakistan rupee shed 11 paisas against the US dollar during the two sessions of this week, while it has appreciated by 33 paisas during the current year 2022. The local unit has depreciated by Rs18.75 during the ongoing fiscal year 2021-22.
Dubai-based forex analysts opined that trade and current account deficits due to rising import bill and depletion in the foreign exchange reserves are hurdles to the rupee’s stability.
The trade deficit ballooned by 106 per cent to $25.48 billion in the first half of the current fiscal year 2021-22 due to a massive surge in imports, which touched $40.50 billion. Likewise, foreign exchange reserves also fell to $23.90 billion from $24.02 billion last week.
Rupee seen stabilising in the days ahead
However, the analysts added that the rupee is likely to remain stable against the dollar amid a recovering sentiment that the government is taking significant strides for the revival of the International Monetary Fund’s (IMF) Extended Fund Facility (EFF).
Pakistan's parliament had passed a mid-year budget on Thursday that will end exemptions on sales tax as part of fiscal tightening and a law to grant its central bank greater autonomy to win funding from the International Monetary Fund (IMF), Finance Minister Shaukat Tarin had said earlier.
The IMF approval is crucial for the South Asian country which is looking to improve external and current account deficits, a depreciating currency, struggling foreign reserves and rising inflation.
Ending the tax exemptions would raise Rs343 billion ($1.93 billion), Tarin had said in proceedings of the house after parliamentarians from Prime Minister Imran Khan's party and his allies voted in favour of the finance bill.