KARACHI: “When we woke up in the morning we came to know that the Pak rupee has been depreciated almost by PKR 10 against the dollar in the inter-bank market, it was a big shock,” says Zafar Paracha, General Secretary of Exchange Companies Association of Pakistan.
This weekend, the Pak Rupee plunged to a historical low of PKR 144 before closing at 138.64, losing 3.4 percent, against greenback prior to resumption of talks with International Monetary Fund IMF.
“It was like big tremor for the market because yesterday the finance minister, Asad Umar, in his speech (on completion of PTI government’s 100 days in office) had said that things are normal and there is no emergency,” Paracha told Arab News.
Pakistan’s interbank market was closed at PKR 133.98 against the dollar on Thursday which on Friday witnessed “unexpected movement” and hit low of PKR 144 against the dollar. “Though devaluation was expected but we were not expecting such big depreciation in a single day,” Fahad Irfan, Head of Research at Alfalah Securities, told Arab News.
This is the sixth round of Pak rupee devaluation since December 2017. The government had devalued Pak Rupee from PKR 105 on December 8, 2017, to PKR 135 on October 09, 2018, making the currency 27 percent weaker. Latest devaluation to PKR 138.64 is 32 percent cumulative since the December 2017.
Pakistan is negotiating with the IMF for the bailout program Islamabad needs to steer the economy out of balance of payment crisis. Among conditions of energy prices hike, interest rate hike, the IMF has asked the country to further devalue its currency.
Many expect that the latest devaluation is in line with the directions of IMF. “Most likely it could be IMF prior action,” Muhammad Sohail, CEO of Topline Securities, told Arab News.
“IMF has asked for rupee devaluation upto PKR 145 to PKR 150 against dollar and it seems that the government has taken this step despite the fact that apparently government say they have not availed the program yet,” Malik Bostan, President of Forex Association of Pakistan, commented.
“People are in state of shock because such movement is dangerous for market,” Bostan said adding “since morning only 1 to 2 percent trading in the currency has taken place in the open market” .
Financial experts believe that the devaluation of Pak Rupee will not end here as the country is expected to experience another wave of devaluation against dollar when the government will resume talks with the IMF. ” We can expected further rupee depreciation in January 2019 when the government is expected to resume talks with the fund for bailout program,” Fahad Irfan expected.
Experts believe that the devaluation was much needed as Pakistan’s external current account deficit CAD remained higher than expectations. For the period Jul-Oct 2018, CAD was reported at $4.8 billion, 1.6 percent of GDP.
As a result, Pakistan foreign exchange reserves also declined from $9.8 billion in Jul 2018 to $8 billion as of November 23, 2018, which is less than 2 months of import cover. This is despite the $1 billion inflow from Saudi Arabia which the country received last week, according to Topline Securities research.
Rupees hits historic low ahead of talks with IMF
Rupees hits historic low ahead of talks with IMF
- Pakistan’s rupee has been devalued by 32 percent since December 2017
- The devaluation may be prior action on the condition of IMF to further devalue — analysts
US pump prices surge as Iran war upends global energy supply
- Fuel prices jump over 10 percent as oil prices surge
- Analysts predict further price rises due to market conditions
MARIETTA/NEW YORK : US retail gasoline and diesel prices are soaring as the US-Israel war with Iran constrains oil and fuel exports, which could be a political test for President Donald Trump’s Republican Party ahead of midterm elections in November.
Fuel prices jumped more than 10 percent this week as oil rose above $90 a barrel, its highest in years, adding pain at the pump for consumers already strained by inflation.
Trump on Thursday shrugged off higher gasoline prices in an interview with Reuters, saying “if they rise, they rise.”
The president had vowed to lower energy prices and unleash US oil and gas drilling during his second term, but much of his tenure has been marked by volatility and uncertainty amid shifts in policies like tariffs and geopolitical turmoil.
The US is the world’s largest oil producer. It is a major exporter but also imports millions of barrels a day since it is the world’s largest oil consumer.
As of Friday, the national average prices for regular gasoline stood at $3.32 a gallon, up 11 percent from a week ago and the highest since September 2024, according to data from the motorists association AAA. Diesel was at $4.33, up 15 percent from a week ago, surging to the highest since November 2023.
Midwest, south feel the pinch
US motorists in parts of the Midwest and the South, including states that supported Trump, have seen some of the steepest increases in fuel costs since the conflict in Iran started.
In Georgia, a swing state, average retail gasoline prices rose 40.1 cents a gallon over the past week, according to fuel tracking site GasBuddy.
Andrenna McDaniel, a health care insurance worker in South Fulton, Georgia, said she was surprised to see prices skyrocket overnight.
“They jumped up so quickly,” she said on Friday, adding that she does not agree with the war at all.
McDaniel, a Democrat, said that for now she is only driving for the most important things, and feels lucky that she works from home so she does not have to drive as much as other people do. Georgia voted for Donald Trump in the 2024 election.
Trump voter Richard Soule, 69, a US Air Force veteran and a retired firefighter, said a little pain at the pump is worth Trump’s efforts to protect America.
“When President Trump went in there and bombed out their nuclear, and they just thumbed their nose at it, I believe he did the right thing at the right time,” Soule said on Friday as he filled up his Ford F-150 truck in Marietta, Georgia.
Other states, including Indiana and West Virginia have seen prices rise by 44.3 cents and 43.9 cents, respectively.
Prices may rise further
More pain may be on the way, analysts said, as oil prices continue to trend upward. On Friday, US oil futures settled at $90.90 a barrel, up nearly $10 and the biggest single-day rise since April 2020.
“Given current market conditions, the national average price of gasoline could climb toward $3.50 to $3.70 per gallon in the coming days if oil continues rising and supply disruptions persist,” GasBuddy analyst Patrick De Haan said.
The disruptions in the Middle East and the Strait of Hormuz, a key trade conduit, have boosted demand for US oil abroad, which in turn has driven up prices for domestic refiners too.
“The US has weaned itself off of its dependence on Middle Eastern crude, but obviously Asian refineries, and to a lesser extent, European refineries have not,” Denton Cinquegrana, chief oil analyst with OPIS. “That’s what you’re seeing happen in the spot market, because the demand for US exports rise, and so the price rise.”
Seasonal factors could add further pressure. Gasoline prices typically go up in the spring and peak in the summer due to higher gasoline demand and production of summer-blend gasoline, which is more costly to produce. Diesel fuel saw an even more aggressive jump since Iran began retaliating against US and Israeli strikes, significantly disrupting shipping in the Strait of Hormuz.
Global diesel inventories have remained in tight supply due to heavy demand for heating and power generation during a prolonged winter in the US and other parts of the world and a structural tightness of refining capacity. Sticker prices of everything from food to furniture go up when the cost of diesel goes up, as the fuel is mainly used in freight transportation, manufacturing, agriculture, and global shipping, analysts said.
“In a world where buzzword seems to be ‘affordability’, that is certainly not going to help,” Cinquegrana said.
