KARACHI: The rupee depreciated by an additional 0.45% or Rs0.71 against the US dollar on Thursday and closed at 159.13 in the inter-bank market.
According to the State Bank of Pakistan, the rupee had closed at 158.42 on Wednesday. The latest drop brings the four-day fall in rupee to 3.17% as it had been at 154.24 on Friday.
“The main reason for the drop in rupee value is hot foreign selling (of government securities),” remarked Forex Association of Pakistan President Malik Bostan while talking to The Express Tribune. “As foreigners continue to sell the securities, the rupee is dropping and the dollar is rising.”
He added that the country had begun payments to foreigners as three-month Treasury bills were maturing. Foreigners were refraining from reinvesting money and some were pulling out, undermining the value of the rupee. Boston pointed out that foreign selling was also being noted in the stock market for the past many weeks due to which the rupee had been further hurt.
“In addition to this, all regional currencies are falling and the rupee is following suit,” he said. He also cited the rumors doing rounds in the market that the State Bank would slash the key policy rate next week, prompting investors to pull out their investments.
In the open market, Bostan revealed, there was virtually no demand and all the currency exchange was taking place in the inter-bank market. “There is no public buying of dollars,” he pointed out.
Despite no demand, the rupee shed 0.5 from its value against the dollar in the open market and closed at 159.
Nevertheless, Bostan voiced hope that the rupee fluctuation would soon come to an end and the currency would return to previous levels as foreigners were expected to invest further in Pakistan after economic conditions stabilized. Topline Securities’ Research Director Syed Atif Zafar confirmed that the major reason for the rupee fall was massive foreign divestment in T-bills.
He was the view that although foreign selling at Pakistan Stock Exchange (PSX) affected the rupee, the impact was meager compared to that from selling of T-bills. “On average, the divestment in PSX amounts to $15 million a day, however, in T-bills, we see divestment of even $150 million or more during some days.”