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Pakistan rupee fell for the seventh consecutive session against the US dollar, as the local currency registered a new record low after depreciating 0.26% in the inter-bank market on Tuesday.

As per the State Bank of Pakistan (SBP), the rupee closed at 181.73, its weakest level in history, after a day-on-day depreciation of 48 paisas. On Monday, the local currency closed at the then-record low of 181.25 against USD.

The rupee has lost 16.21% since its most-recent high achieved in May last year. In a fiscal year to date (FYTD) basis, the local currency has recorded a depreciation of 13.31%.

Rupee falters for sixth straight session against US dollar

The fall comes as oil prices, a major determinant of currency parity, extended gains on Tuesday as some European Union members discussed a potential oil embargo on Russia and attacks by Yemen's Iran-aligned Houthi group on Saudi energy and water desalination facilities sent jitters through the market.

Front-month West Texas Intermediate futures rose $2.28, or 2.03%, to $114.4 a barrel on NYMEX and Brent futures gained $2.89, or 2.5%, to $118.51 a barrel on the Intercontinental Exchange. Both contracts had settled up more than 7% on Monday as the potential for more supply disruptions weighed on the market.

Furthermore, uncertainty pertaining to the seventh International Monetary Fund (IMF) review has created volatility in the market, Saad Khan, Head of Research at IGI Securities told Business Recorder.

“The rise in commodity prices, alongside talks with IMF on the seventh review, are creating pressure,” he said, adding that the recent relief package announced by the government has been taken as a negative by the IMF, which is questioning the government over the fiscal space needed for the programmes.

“Domestic political noise is also a problematic factor,” said Khan, who added that political uncertainty relating the opposition filing a no-confidence motion against Prime Minister Imran Khan has created fear that has pushed players towards buying dollars, creating a demand pressure in the market.

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The analyst was of the view that if Pakistan's central bank raises its policy rate, and takes measures to increase foreign exchange reserves, it could bring stability to the rupee.

The story was originally published in Business Recorder on March 22, 2022.