Pakistani currency remained under pressure against the US dollar on Tuesday amid the Middle Eastern crisis and volatile global oil prices as it hit a new three-week low at slightly below Rs281.50/$ in inter-bank market.

According to State Bank of Pakistan’s (SBP) data, the rupee dropped 0.18%, or Rs0.52, and closed at Rs281.47 against the greenback.

It was the seventh consecutive working day of decline in the currency’s value, which cumulative lost 1.65%, or Rs4.64, in that period.

Market talk indicates that exporters have slowed down the selling of US dollars in the market, as they believe the Middle Eastern crisis will jack up the foreign currency against the rupee very soon. The wait-and-see strategy suits them in the current circumstances.

At the same time, the Israeli aggression against Palestine has made global oil prices volatile, taking the cost of energy imports to elevated levels. Latest forecasts signal crude prices may shoot up to $150 per barrel if the geopolitical crisis prolongs, which will lead to an increase in demand for US dollars for expensive imports.

The Middle Eastern conflict has reversed the recent high supply and low demand equation, forcing importers to buy dollars at the prevailing prices.

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In the open market, the local currency dropped Rs0.50 to Rs283/$, according to the Exchange Companies Association of Pakistan (ECAP).

With this, the difference between exchange rates in the two markets increased to 0.54%, or Rs1.53, but it was well within the IMF-prescribed maximum gap of 1.25% (around Rs4 at current prices).

The latest rupee depreciation and increase in the price of gold in global markets encouraged the local bullion pricing body to revise up prices by Rs900 to Rs213,000 per tola (11.66 grams).

The precious metal surpassed the psychological barrier of $2,000 per ounce (31.10 grams) again in the international market amid the grim geopolitical situation. It rose $3 to $2,015 per ounce, the pricing committee reported.

Published in The Express Tribune, November 1^st, 2023.

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