Rupee drops marginally against US dollar

Pakistan's rupee registered marginal losses against the US dollar, declining 0.03% on Monday. At around 12:40pm, the rupee was being quoted at 224, a depreciation of Re0.06 during intra-day trading.

During the previous week, the rupee remained largely stable and fell 0.34% against the US dollar in the inter-bank market as the State Bank of Pakistan (SBP) and Finance Minister Ishaq Dar moved to quell nerves over the country's upcoming payment obligations.

The rupee lost value in four of the five sessions, but remained within the 223 level as restrictions imposed over import payments, opening of letters of credit, and foreign-currency carrying limits on travelers meant the currency stayed administratively under control.

In a development that took markets by surprise, the Monetary Policy Committee (MPC) of SBP on Friday raised the key interest rate by 100bps, taking it to 16%, the highest since 1998-1999 when it stood at 16.5%.

The MPC felt it was prudent to increase the policy rate from previous level of 15% to 16% as inflationary pressures have proven to be stronger than expected.