Pakistan rupee mostly steady, but dollar supply woes persist

• Analysts say rupee hovering around Rs218-Rs224 per dollar since last MPC meet.
• Volatility earlier seen in interbank rates shifted to open, black markets.
  
• Dollar supply-demand mismatch persists amid low foreign exchange reserves.

KARACHI: Pakistan’s rupee Friday closed mostly unchanged against the US currency, on account of unabated corporate demand for the dollar and constrained supplies.

The currency ticked down Rs0.02 or 0.01% to close at 223.94 in the interbank market, according to the State Bank of Pakistan (SBP).

According to an AKD Research Report, the currency has been trading in a range between Rs218 per dollar and Rs224 since the last Monetary Policy Committee (MPC) meeting on October 10, 2022.

“However, the volatility earlier seen in the interbank rates has shifted to the open and black markets, where spreads have reached Rs8-10 on every dollar,” said AKD analysts said in the report.

On Thursday, the rupee went down by a few notches versus the US dollar, losing 0.05% in the interbank market as investors awaited clarity on the army chief’s appointment.

The Monetary Policy Committee of the SBP jacked up the key policy rate by 100 basis points to 16%, while noting that the decision reflects the MPC’s view that inflationary pressures have proven to be stronger and more persistent than expected.

"This decision is aimed at ensuring that elevated inflation does not become entrenched and that risks to financial stability are contained, thus paving the way for higher growth on a more sustainable basis," the MPC said.

Dealers pinned the persistent depreciation on higher outflows and less inflows, the pressure on the rupee was mounting on account of dwindling foreign exchange reserves.

By November 18, the foreign currency reserves held by the central bank stood at $7.825 billion, down $134 million, compared with $7.959 billion recorded on November 11.