Rupee weakens by 26 paisas against dollar

Rupee weakens by 26 paisas against dollar

The Pakistani rupee weakened by another 26 paisas against the US dollar on Monday, closing at Rs154.13 in the interbank foreign exchange market. This depreciation comes as demand for the greenback continues to rise due to import and corporate payment requirements.

The rupee’s decline from last Friday’s closing rate of Rs153.87 marks the sixth consecutive trading day of losses against the dollar. Since April 16, 2021, the rupee has cumulatively depreciated by Rs1.30, reflecting ongoing pressures in the foreign exchange market.

Currency dealers attribute the persistent depreciation to increased demand from the corporate sector, driven by profit and dividend repatriation following the quarter’s end. “The corporate sector’s need to repatriate profits and dividends has significantly boosted demand for the dollar,” said a senior currency dealer.

Additionally, the recent acceleration in economic activity has heightened the demand for imported raw materials and finished goods. As the economy picks up pace, businesses are ramping up their import activities, further exacerbating the demand for foreign currency.

The rise in import payments is also linked to the ongoing global recovery from the COVID-19 pandemic. As international trade resumes and economic activity normalizes, the demand for imported goods has surged, putting additional pressure on the rupee. This trend is expected to continue as businesses strive to meet increasing consumer demand and rebuild supply chains disrupted by the pandemic.

“The economy’s acceleration is a double-edged sword,” noted an economic analyst. “While it signifies recovery and growth, it also increases the demand for imports, which in turn drives up the need for dollars and puts downward pressure on the rupee.”

Despite these challenges, the State Bank of Pakistan (SBP) has been actively monitoring the foreign exchange market and intervening when necessary to stabilize the rupee. However, the persistent demand for dollars due to corporate and import requirements has made it difficult to maintain a stable exchange rate.

The rupee’s continued depreciation poses potential risks for inflation, as a weaker currency makes imported goods more expensive. This could lead to higher prices for essential commodities, impacting the cost of living for the general population.

To address these issues, experts suggest that structural reforms and measures to boost exports are crucial. Enhancing export performance can help balance the trade deficit and reduce reliance on imports, thereby alleviating some of the pressure on the rupee.

As the rupee continues its downward trajectory, all eyes are on the government’s economic policies and the SBP’s strategies to manage the exchange rate and support sustainable economic growth. The coming weeks will be critical in determining the future direction of the rupee and the broader economic landscape.