KARACHI: Pakistan’s real effective exchange rate depreciated to 102.5 in February from 103.3 in the previous month, according to data from the State Bank of Pakistan (SBP) published on Monday.
The rupee ended almost flat against the dollar in the interbank market. It closed at 279.3 per dollar, compared with the previous close of 279.31. Dealers said the local unit remained stable due to healthy remittance inflows associated with Ramazan and Eid. However, market players are cautious about the potential impact of volatile global oil prices on Pakistan’s inflation and external account outlook.
The conflict involving Israel, the US, and Iran has now entered its third week, showing no immediate signs of de-escalation. Consequently, international oil prices remain high, above $100 a barrel.
“While the government absorbed the impact of the latest increase in global oil prices in the most recent fuel price adjustment, the pressure may eventually need to be passed on after the Eid holidays if crude prices remain at current levels,” said Chase Securities in a note.
“Although the upcoming quarter could see some pressure on inflation and the external account due to higher energy prices, the current geopolitical situation is widely seen as temporary in nature,” it said. “Once tensions subside, macroeconomic indicators are expected to normalise, restoring investor confidence and improving sentiment,” it added.
