Interbank Market Sees 10 Paisas Fall in Rupee against Dollar

Interbank Market Sees 10 Paisas Fall in Rupee against Dollar

Karachi, July 4, 2024 – The Pakistani rupee experienced a decline of 10 paisas against the US dollar on Thursday, settling at PKR 278.50 compared to the previous day’s closing of 278.40 in the interbank foreign exchange market.

This shift reflects heightened demand for foreign currency attributed to import requirements amidst global market dynamics.

Currency analysts attributed the rupee’s slide primarily to increased dollar demand, exacerbated by the closure of international currency markets in observance of US Independence Day. With limited external trading activity, the rupee faced intensified pressure as local importers sought dollars for their payment obligations.

Despite the surge in demand, the rupee managed to avoid a steeper decline, supported by inflows from exports and remittances. These sources provided a critical counterbalance to the robust appetite for dollars in the market.

The spike in dollar demand coincided with a noticeable decrease in Pakistan’s foreign exchange reserves, which dropped by $208 million to $14.207 billion for the week ending June 21, 2024, as reported by the State Bank of Pakistan (SBP). Notably, the SBP’s own reserves saw a significant reduction of $239 million, falling to $8.896 billion during the same period. Analysts attribute this decline to governmental repayments against foreign loans, underscoring ongoing challenges in managing Pakistan’s external debt commitments and stabilizing its financial footing.

In response to these economic pressures, Pakistan has actively sought support from international financial institutions and allied nations to reinforce its economic resilience. These efforts aim to alleviate the impact of dwindling reserves and address fiscal hurdles effectively.

The measures outlined in the recently announced 2024-25 budget have also played a pivotal role in shaping market dynamics. The budget prioritizes fiscal consolidation strategies, including steps to curtail the fiscal deficit and bolster revenue streams. These initiatives have instilled a sense of caution among importers, thereby moderating immediate dollar demand and lending stability to the rupee in the short term.

Looking forward, economic analysts remain vigilant regarding further policy developments and external economic variables that could influence the rupee’s trajectory. As Pakistan navigates its fiscal challenges amidst global economic uncertainties, stakeholders are closely monitoring efforts to manage external debt and fortify economic stability.

The interplay of these factors underscores the intricate balance Pakistan must maintain in managing its currency’s value against the backdrop of global economic fluctuations and internal fiscal imperatives. Market participants and policymakers alike continue to assess strategies aimed at sustaining economic equilibrium and fostering sustainable growth in the face of evolving global financial dynamics.