Rupee falls to 291.5 against US dollar, its weakest closing in inter-bank market since May 11 – Markets

The Pakistani rupee closed at its weakest level against the US dollar in the inter-bank market since May 11, depreciating 1.03% on Tuesday.

At close, the rupee settled at 291.5, as per the State Bank of Pakistan (SBP). This is its weakest closing since May 11 this year, when the rupee settled near the 299 level.

Its fall on Tuesday comes as the caretaker setup took over from the coalition government to run affairs of the economy that is currently enrolled in a programme with the International Monetary Fund (IMF).

During the previous week, the rupee saw depreciation of 0.52%, closing at 288.49 against the US dollar.

The currency fell in four out of the five sessions, as effects of the IMF programme ended to officially make way for economic fundamentals.

Additionally, inflows seemed to have dried up with foreign exchange reserves held by SBP falling $110 million on a weekly basis to stand at $8.04 billion as of August 4, data released in the previous week showed.

In a key development, SBP Governor Jameel Ahmad said that global economic conditions have largely contributed to higher inflation in Pakistan.

“World economy remained under pressure in near past that also resulted in an increase in inflation in Pakistan and these conditions were further aggravated due to floods and delay in IMF program review,” he said.

He further said that the nine-month Stand-by Arrangement (SBA) agreed with the IMF has improved foreign reserves of the country and largely resolved near-term issues pertaining to the external sector of the economy.

Globally, the safe-haven US dollar stayed firm against major peers while the yuan sank to a nine-month trough after China’s central bank unexpectedly cut key policy rates for a second time in three months on Tuesday to shore up the country’s sputtering economy.

The dollar index, which measures the currency against six developed-market counterparts including the euro and yen, was about flat at 103.08 after hitting a 1-1/2-month high at 103.46 on Monday, buoyed by demand for the safest assets following a spate of disappointing Chinese economic indicators that raised concerns about global growth.

Punctuating those worries, Chinese data on industrial output, retail sales and investment released shortly after the PBOC’s rate cut showed unexpected slowdowns.

Oil prices, a key indicator of currency parity, fell in early trade on Tuesday ahead of a slew of economic data from China which should provide clues on the outlook for any recovery in demand in the world’s top oil importer.