The Pakistani rupee (PKR) experienced a reversal of fortune against the US dollar during intraday trade on March 31, posting losses after initially gaining some ground. The interbank rate lost around Rs. 1 early in the day, dropping to 284.75 by 11 AM, before recovering to the 283 level by 1:25 PM, where it stayed for the remainder of the day. At the close of trading, the PKR depreciated by 0.05 percent to close at 283.79 after losing 13 paisas during intraday trade.
This decline in the value of the PKR occurred despite the announcement by Finance Minister Ishaq Dar that China had extended a $2 billion loan to Pakistan for another year. Since January 2023, the rupee has fallen nearly Rs. 52, and today’s rate movement reflects a drop of 13 paisas. The foreign currency reserves held by the State Bank of Pakistan (SBP) as of March 24th stood at $4.244 billion, down $354 million compared to the previous week.
According to money changers, the drop in the value of the PKR reflects a lack of confidence among market players in the current yield-hunting framework of the South Asian economy. Despite macro improvements, investors are not optimistic about the near-term business outlook. Additionally, political instability and the use of state institutions to derail elections have not been well received by investors.
In interbank trading on March 31, the PKR was bearish against most other major currencies, losing three paisas against the Saudi Riyal (SAR), three paisas against the UAE Dirham (AED), 19 paisas against the Canadian Dollar (CAD), Rs. 1.45 against the Pound Sterling (GBP), and Rs. 1.59 against the Euro (EUR). However, it gained three paisas against the Australian Dollar (AUD).
In summary, the PKR experienced losses against the US dollar during intraday trade on March 31, despite the extension of a $2 billion loan by China to Pakistan. Money changers attribute the drop in value to a lack of confidence among investors in the current economic framework and political instability in the country. The PKR was also bearish against most other major currencies in the interbank market on that day.