Pakistani Rupee loses Against the Dollar

The rupee in the interbank market lost 34 paisas to end Thursday’s session at the level of Rs167.33 against the greenback. 

Meanwhile, in other currencies, the euro at the open market was up by 50 paisas to trade at Rs189.50 whereas the pound was selling at 50 paisas up to Rs211. 

In addition, the Riyal was up 10 paisas to Rs45.30 whereas dirham was up by 20 paisas, selling at Rs44.30.

The rupee’s slide comes despite a record increase in the country’s foreign exchange reserves. In the week ending on July 10, the forex reserves held by the State Bank of Pakistan (SBP) increased by $12 million to $12.054 billion. 

This is the highest reserves held by the SBP in the last three years. The SBP forex reserves in the fiscal year 2017-18 were at $16.383bn compared to $21.4bn in fiscal year 2016-17. 

The reserves for the first since have hit the $18.952bn mark.

Analysts argue the rupee’s fall does not fall in line with the fundamentals as the higher-than-expected increase in the foreign workers’ remittances during the current fiscal year have helped bolster the country’s forex reserves. 

The remittances in the fiscal year ended on June 30 increased to a record $23 billion despite the Covid-19 shock to the global economy in the Jan- June 2020 period, latest data released by the State Bank of Pakistan (SBP) showed earlier this week.

“Workers’ remittances rose by a significant 50.7 percent during June 2020 to reach record high $2.466 billion compared with $1.636bn in June 2019. Similarly, on a cumulative basis, workers’ remittances increased to a historic high level of $23.120bn during FY20, witnessing a growth of 6.4pc over $21.739bn during FY19,” the central bank said in a press release.

The increase in dollar holdings should have instead appreciated the rupee’s value, however, the currency markets are behaving in an entirely opposite manner.