KARACHI: Taking cues from burgeoning import payments and uncertain geopolitical conditions, the Pakistani currency hit an all-time low of Rs179 during the intra-day trade against the US dollar in the inter-bank market on Monday.
The steep fall was attributed to the panic accumulation of dollars over fears that the supply of the greenback might reduce in the country due to the Russia-Ukraine conflict.
The local currency last dropped to an all-time low of Rs178.63 on March 9.
Pakistan-Kuwait Investment Company Head of Research Samiullah Tariq said that the currency is under pressure due to higher demand because of the geopolitical situation which has impacted the commodity prices.
He said: “The local currency is now showing signs of the impact of the recent commodity price hike witnessed in the international market.”
Endorsing his views, Arif Habib Limited Head of Research Tahir Abbas said that despite the slight correction in international oil prices, the Pakistani currency is still under pressure because the prices are still high.
“Rupee is incorporating the pressure of global oil prices,” he said, adding that because of this current account deficit is also expected to remain on the higher side.
The uptrend in international commodity prices suggests that Pakistan’s import bill would remain high going forward — which will keep the rupee-dollar parity towards the higher side.
How much ground the rupee might lose?
Analysts said it all depended on the intensity of the geopolitical conditions. The Russia-Ukraine conflict has continued to take its toll on economies around the world.
Tariq said: “The rupee-dollar parity will improve when Ukraine-Russia conflict normalises.”
Meanwhile, Abbas was of the view that the currency market will remain “volatile in the short-term” and the Pakistani rupee will likely drop to “Rs180 against the US dollar.”
Dealers said that the future outlook of the local currency also depends on future trends of commodities in the international market.
If prices do not stabilise, Pakistan would be spending more on the imports of energy and palm oil, resultantly putting pressure on the local currency.
JS Global in their analysis predicts that the local currency will drop to Rs182.8 against the greenback by June end, down by 2% from current levels.