Rupee hits one-year low against dollar

[Norwegian]

Rupee hits one-year low against dollar
Shahid IqbalPublished September 3, 2021 - Updated about 8 hours ago
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32

Irfan Khan

KARACHI: Uncertainty continued in exchange rate markets on Thursday where buyers and sellers were found asking each other about the limit of appreciation of the US dollar, which has risen by 10.5 per cent against the rupee in the last four months touching one-year high.
Currency dealers, experts and analysts have many reasons for the steep fall in the local currency value against the US dollar, but they said there was no intervention from the State Bank of Pakistan (SBP) to stop this devaluation to bring stability.
In the interbank market the US dollar’s closing rate as provided by the SBP was about Rs167 while bankers said the price remained higher during the session.
Bankers and currency dealers were trying to understand why the rupee has been falling against the US dollar since May as the country’s foreign exchange reserves have grown rapidly with State Bank of Pakistan’s holdings soaring to an all-time high.

Bankers say SBP hasn’t intervened to check local currency’s slide

“It may be the widening trade deficit or fear of higher current account deficit in FY22 and increased requirement of US dollars for debt servicing, but right now the exchange rate is not stable,” said a currency dealer in the interbank market.
He said nobody can ascertain the limit of devaluation of the rupee which is alarming as the inflow of high cost of imported goods is creating inflation.
The SBP remains silent over the recent steep fall of the local currency.
SBP Governor Dr Reza Baqir during the presentation of monetary policy last month made it clear that the current account deficit would be higher than FY21. He said the deficit would be in the range of 2 to 3pc and the exchange rate would respond this deficit in the form of appreciation of US dollar. He also did not identify the limit of devaluation of local currency or the point of stability of exchange rate.
The dollar touched it’s lowest against the rupee on May 9 when it was traded at Rs151.17. Since then it started moving upward and reached Rs167 on Thursday, just close to the highest price of Rs168.2 in August 2020.
“We are not able to judge where the limit of this devaluation of local currency is, but there are concerns among the stakeholders about this strange exchange rate stability,” said a senior banker.
Currency dealers in the open market were also unable to find the end point of this devaluation despite very low turnout in their market.
The demand in open market is still very low but the dollar got higher price as it was traded at Rs167.80.
The trade deficit widened by 133pc to $4.05bn in August reflecting mounting pressure on exchange rate due to higher demand for dollars from the importers.
Published in Dawn, September 3rd, 2021

@Desprado @Patriot forever @Zibago @ziaulislam @Del @Dual Wielder

 

[Imran Khan]

i hate rupee i love euro

 

[Patriot forever]

Rupee hits one-year low against dollar
Shahid IqbalPublished September 3, 2021 - Updated about 8 hours ago
Facebook Count
Twitter Share
32

Irfan Khan

KARACHI: Uncertainty continued in exchange rate markets on Thursday where buyers and sellers were found asking each other about the limit of appreciation of the US dollar, which has risen by 10.5 per cent against the rupee in the last four months touching one-year high.
Currency dealers, experts and analysts have many reasons for the steep fall in the local currency value against the US dollar, but they said there was no intervention from the State Bank of Pakistan (SBP) to stop this devaluation to bring stability.
In the interbank market the US dollar’s closing rate as provided by the SBP was about Rs167 while bankers said the price remained higher during the session.
Bankers and currency dealers were trying to understand why the rupee has been falling against the US dollar since May as the country’s foreign exchange reserves have grown rapidly with State Bank of Pakistan’s holdings soaring to an all-time high.

“It may be the widening trade deficit or fear of higher current account deficit in FY22 and increased requirement of US dollars for debt servicing, but right now the exchange rate is not stable,” said a currency dealer in the interbank market.
He said nobody can ascertain the limit of devaluation of the rupee which is alarming as the inflow of high cost of imported goods is creating inflation.
The SBP remains silent over the recent steep fall of the local currency.
SBP Governor Dr Reza Baqir during the presentation of monetary policy last month made it clear that the current account deficit would be higher than FY21. He said the deficit would be in the range of 2 to 3pc and the exchange rate would respond this deficit in the form of appreciation of US dollar. He also did not identify the limit of devaluation of local currency or the point of stability of exchange rate.
The dollar touched it’s lowest against the rupee on May 9 when it was traded at Rs151.17. Since then it started moving upward and reached Rs167 on Thursday, just close to the highest price of Rs168.2 in August 2020.
“We are not able to judge where the limit of this devaluation of local currency is, but there are concerns among the stakeholders about this strange exchange rate stability,” said a senior banker.
Currency dealers in the open market were also unable to find the end point of this devaluation despite very low turnout in their market.
The demand in open market is still very low but the dollar got higher price as it was traded at Rs167.80.
The trade deficit widened by 133pc to $4.05bn in August reflecting mounting pressure on exchange rate due to higher demand for dollars from the importers.
Published in Dawn, September 3rd, 2021

@Desprado @Patriot forever @Zibago @ziaulislam @Del @Dual Wielder

It is clear why rupee depreciated, it is bearing the brunt of increase in imports ( it is natural as economy accelerates demand for petrol, diesel etc is increased along with other essential raw materials etc) and without intervention from SBP our reserves are protected.

If the SBP continue with its right policy, when the inflationary cycle eases in international market rupee will gain strength (what I expect is 2H FY 21-22). In order to stop the depreciation, SBP can slow down the economy actively in a bid to reduce imports or increase duties further on some imported items ( I can hardly think of anything as there are essentially very limited luxury items which are already taxed) slowing down the economy passively.

What I don't support is increasing interest rates ( active slowdown) which imo SBP will not do, since the inflation is in range of 8.4% and demand pressure is still not there (economy is not heating up and there is still room).

The best thing to do is wait it out for the international commodity inflation cycle to slow down with calculated minimal intervention to preserve the momentum of economy.

As the article points out dollar demand is open market is low ( that means the depreciation is blunting the major impact) so any intervention would be very small just to stabilise the market not to control the movement.

 

[Desprado]

It is clear why rupee depreciated, it is bearing the brunt of increase in imports ( it is natural as economy accelerates demand for petrol, diesel etc is increased along with other essential raw materials etc) and without intervention from SBP our reserves are protected.

If the SBP continue with its right policy, when the inflationary cycle eases in international market rupee will gain strength (what I expect is 2H FY 21-22). In order to stop the depreciation, SBP can slow down the economy actively in a bid to reduce imports or increase duties further on some imported items ( I can hardly think of anything as there are essentially very limited luxury items which are already taxed) slowing down the economy passively.

What I don't support is increasing interest rates ( active slowdown) which imo SBP will not do, since the inflation is in range of 8.4% and demand pressure is still not there (economy is not heating up and there is still room).

The best thing to do is wait it out for the international commodity inflation cycle to slow down with calculated minimal intervention to preserve the momentum of economy.

As the article points out dollar demand is open market is low ( that means the depreciation is blunting the major impact) so any intervention would be very small just to stabilise the market not to control the movement.

Bro it already overheated because devaluation is happening at the pace Shoaib Akhtar and it is already exhausted . People would have supported the devaluation if it had stop imports and improve somewhat exports ,however, it was totally opposite that we had 4.1 billion dollar trade deficit just in one month that Pakistan never had and stagnated our exports altogether. Devaluation without cause and bringing unnecessary inflation is crime and major flop economics. What is the purpose of devaluation if it is not giving the results? It will only create panic, proverty, inflation and recession, and unnecessary pressure on the government. All there hard work of 3 years will be gutter line. At this rate IMF will not allow us to do more CAD because it is unstable and it is not delivering what lenders want. Do you think within 2 months we are showing 2.5 billion dollar CAD IMF will allows to for a growth no, Now we are back in 2018 ,where do hard work to convince IMF, hike in interest rate at major rate. Now we are very weak to negotiate with IMF because we have borrowed around 3.5 to 4 billion dollar alone for July-September for CAD alone.


I can gurantee you that Imran Khan will fire Reza Baqir and FM both together like in 2019 with Asad Umar happened because they are also to be blamed this mess and we starting the major issue use reserve to control PKR because they will have right point of view that Devaluation does not stop CAD or it stops import or it increase export so they will no choice but use that. This will be because Shaukat Tarin and Reza Baqir internal conflict.

 

[salute]

Bro it already overheated because devaluation is happening at the pace Shoaib Akhtar and it is already exhausted . People would have supported the devaluation if it had stop imports and improve somewhat exports ,however, it was totally opposite that we had 4.1 billion dollar trade deficit just in one month that Pakistan never had and stagnated our exports altogether. Devaluation without cause and bringing unnecessary inflation is crime and major flop economics. What is the purpose of devaluation if it is not giving the results? It will only panic, proverty, inflation and recession, and unnecessary pressure on the government. All there hard work of 3 years will be gutter line. At this rate IMF will not allow us to do more CAD because it is unstable and it is not delivering what lenders want. Do you think within 2 months we are showing 2.5 billion dollar CAD IMF will allows to for a growth no, Now we are back in 2018 ,where do hard work to convince IMF, hike in interest rate at major rate. Now we are very weak to negotiate with IMF because we have borrowed around 3.5 to 4 billion dollar alone for July-September for CAD alone.

To put your point in perspective. India has a trade deficit of just $2.35 billion on a trade of over $110 billion in July. Imran has managed to get $5 billion trade deficit ( if you include services) on a trade of less than $10 billion. That's some achievement by Imran (Not).

 

[Patriot forever]

To put your point in perspective. India has a trade deficit of just $2.35 billion on a trade of over $110 billion in July. Imran has managed to get $5 billion trade deficit ( if you include services) on a trade of less than $10 billion. That's some achievement by Imran (Not).

View attachment 775279

They are running a balanced economy for decades.

The reason in the past decade their exports both services and goods grew along with their imports. They never manipulated their currency. They are where they are today because of Manmohan Singh direction after late 1990's.

From 2013 - 2018 Pakistan imports grew exponentially while exports decreased, this led to the imbalance.

Even as of latest FY 21 we have not gone past the level of imports in 2018 with much higher exports and remittances.

Compare the 2 using 2018 figures for both and see how better off we are now in 2021 than were in 2018.

 

[Desprado]

It is clear why rupee depreciated, it is bearing the brunt of increase in imports ( it is natural as economy accelerates demand for petrol, diesel etc is increased along with other essential raw materials etc) and without intervention from SBP our reserves are protected.

If the SBP continue with its right policy, when the inflationary cycle eases in international market rupee will gain strength (what I expect is 2H FY 21-22). In order to stop the depreciation, SBP can slow down the economy actively in a bid to reduce imports or increase duties further on some imported items ( I can hardly think of anything as there are essentially very limited luxury items which are already taxed) slowing down the economy passively.

What I don't support is increasing interest rates ( active slowdown) which imo SBP will not do, since the inflation is in range of 8.4% and demand pressure is still not there (economy is not heating up and there is still room).

The best thing to do is wait it out for the international commodity inflation cycle to slow down with calculated minimal intervention to preserve the momentum of economy.

As the article points out dollar demand is open market is low ( that means the depreciation is blunting the major impact) so any intervention would be very small just to stabilise the market not to control the movement.

People will not wait now because the excuse that PTI had that devaluation increase export and decrease import is finished or control CAD is also finish. They will try to give a new lollipop and they are trying to that we are saving reserve will flop with 2 months because Shukat Tarin is has taken already 2.5 billion dollar commercial loan to fill the gap of CAD in 2 months, which is at very high interest rate and low period. So saving reserve policy will be over by late October. We heading for Titanic Crash.

 

[Maula Jatt]

Kindly posters do not engage with the Indian troll salute guy

he comes in like this and slowly ruins a productive conversation and threads

I have seen this pattern time and time again in Bangladesh forum section (go check it out- the art of ruining threads) and he'll turn threads to shit here too

If you want a productive conversation

DO NOT ENGAGE!!!

@Patriot forever , @Desprado , @Norwegian

 

[Patriot forever]

Bro it already overheated because devaluation is happening at the pace Shoaib Akhtar and it is already exhausted . People would have supported the devaluation if it had stop imports and improve somewhat exports ,however, it was totally opposite that we had 4.1 billion dollar trade deficit just in one month that Pakistan never had and stagnated our exports altogether. Devaluation without cause and bringing unnecessary inflation is crime and major flop economics. What is the purpose of devaluation if it is not giving the results? It will only create panic, proverty, inflation and recession, and unnecessary pressure on the government. All there hard work of 3 years will be gutter line. At this rate IMF will not allow us to do more CAD because it is unstable and it is not delivering what lenders want. Do you think within 2 months we are showing 2.5 billion dollar CAD IMF will allows to for a growth no, Now we are back in 2018 ,where do hard work to convince IMF, hike in interest rate at major rate. Now we are very weak to negotiate with IMF because we have borrowed around 3.5 to 4 billion dollar alone for July-September for CAD alone.


I can gurantee you that Imran Khan will fire Reza Baqir and FM both together like in 2019 with Asad Umar happened because they are also to be blamed this mess and we starting the major issue use reserve to control PKR because they will have right point of view that Devaluation does not stop CAD or it stops import or it increase export so they will no choice but use that. This will be because Shaukat Tarin and Reza Baqir internal conflict.

Overhearing of economy is related to demand pressure not rupee value

You sound like a broken record at this point.

We are not running a fixed overvalued currency that we have to fully use reserves to balance CAD. That's the difference between fixed artificial currency than a normal one.

What part of ' state Bank has not intervined' as clearly mentioned in the article do you not understand.

Please go through my previous comment again, where I acknowledged the genuine concern.

 

[Desprado]

Overhearing of economy is related to demand pressure not rupee value

You sound like a broken record at this point.

We are not running a fixed overvalued currency that we have to fully use reserves to balance CAD. That's the difference between fixed artificial currency than a normal one.

What part of ' state Bank has not intervined' as clearly mentioned in the article do you not understand.

Please go through my previous comment again, where I acknowledged the genuine concern.

Does not matter because devaluation without any purpose is a major flop policiy . Why only Pakistan currency is facing problems? It is because our ship without the captain.

 

[Desprado]

@Patriot forever @Zibago @ziaulislam @Del @Dual Wielder

Remember reserve sole purpose is to save from speculation attack and save from crisis but to not become a major cause of crisis. That is why now since September start PTI is catch 22 phase and it will only get worse for them because the Policy they are applying will not fail but it will also takes back to 2019 where tried to avoid crisis. So people are already tried of facing the highest inflation in Asia, which is Pakistan since 2 years.

 

[Patriot forever]

Does not matter because devaluation without any purpose is a major flop policiy . Why only Pakistan currency is facing problems? It is because our ship without the captain.

Burning reserves without purpose is a problem, currency will stabilize when the demand/supply in free market stabilises or improve with the improvement in free market dynamics. ( No I do not mean it will go back to 100 but recovered to whatever level it can sustain the imbalance at a given time).

The only concern arises when the imbalance becomes significant enough that intervention via reserves comes in the equation to stabilise. Thats why I said our CAD has to come down and this figure does not become a constant so to compel SBP to actively intervine.

Given the extreme inflation curve in the international commodity market I do think it will come down in time, how long it will take my bet is in the 2nd Half of FY22 when crude output and demand gap in the international market narrows that will bring the prices of many commodities down. ( Even Biden was concerned with the OPEC+ slow output increase).

@Patriot forever @Zibago @ziaulislam @Del @Dual Wielder

Remember reserve sole purpose is to save from speculation attack and save from crisis but to not become a major cause of crisis. That is why now since September start PTI is catch 22 phase and it will only get worse for them because the Policy they are applying will not fail but it will also takes back to 2019 where tried to avoid crisis. So people are already tried of facing the highest inflation in Asia, which is Pakistan since 2 years.

Your argument is only valid if we had $50b in reserves and not using them to ride out the international commodity inflation cycle.

 

[HalfMoon]

I would like to see 1 USD = 200 PKR by end of the year.

Good for Exports, FDI and Remittances.

 

[Desprado]

Burning reserves without purpose is a problem, currency will stabilize when the demand/supply in free market stabilises or improve with the improvement in free market dynamics. ( No I do not mean it will go back to 100 but recovered to whatever level it can sustain the imbalance at a given time).

The only concern arises when the imbalance becomes significant enough that intervention via reserves comes in the equation to stabilise. Thats why I said our CAD has to come down and this figure does not become a constant so to compel SBP to actively intervine.

Given the extreme inflation curve in the international commodity market I do think it will come down in time, how long it will take my bet is in the 2nd Half of FY22 when crude output and demand gap in the international market narrows that will bring the prices of many commodities down. ( Even Biden was concerned with the OPEC+ slow output increase).


Your argument is only valid if we had $50b in reserves and not using them to ride out the international commodity inflation cycle.

No PTI argument was only valid when we do not had a highest trade deficit in Pakistan. Is it only Pakistan that is importing high commodity prices? Even PTI insiders has started saying what is the purpose of devaluation if the import has to be sky high ever and much lower export and not helping CAD at all. The growth will be dream now because if had reserve than only we could have growth. Growth with commercial debt and highest import will not justify devaluation and it will allow people to more addicted to PMLN Policiy and only PTI will be blamed for making this mess and hiring Shaukat Tarin.

 

[Patriot forever]

No PTI argument was only valid when we do not had a highest trade deficit in Pakistan. Is it only Pakistan that is importing high commodity prices? Even PTI insiders has started saying what is the purpose of devaluation if the import has to be sky high ever and much lower export and not helping CAD at all. The growth will be dream now because if had reserve than only we could have growth. Growth with commercial debt and highest import will not justify devaluation and it will allow people to more addicted to PMLN Policiy and only PTI will be blamed for making this mess and hiring Shaukat Tarin.

You are running around in circles now, and not making sense at this point.

Overall CAD even for this month will be lower than 2018 where plmn left us that too with fixed currency. I do think we need to pull back CAD and find a way to navigate through this international inflationary cycle.

There is no state Bank intervention you are again blabbering commercial debt, our reserves are at an all time high you are again and again saying if we had reserves we could have growth. Stop with the nuisance.
Take a break and relax.