KARACHI: The Pakistani rupee remained fairly steady against the US dollar on Monday, trading near the 277.4 to 277.5 level in the interbank market. Currency markets shrugged off renewed prospects of diplomacy over the Strait of Hormuz, even as a war-driven oil shock kept global oil prices nearly 65 percent above prewar levels.
The State Bank of Pakistan’s revaluation rates for 2 November showed the dollar flat on the day, with indicative market data at 277.44 to the dollar. The pound traded around 371.2 against the rupee and the euro was near 309.2. The euro’s firmness, according to the report, reflects an energy bill in Europe that German officials said has already crossed the €100bn mark this year.
Gulf currencies move in step with the dollar
The Saudi riyal stayed close to 74 and the UAE dirham close to 75.3, barely moving on the day. Both currencies are pegged to the dollar, so they track it closely. That is why many Pakistani families watch their prices even more closely than the dollar itself.
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Oil swings as Hormuz talks and attacks collide
The timing of the market moves is critical. Eight months into the US-Israeli war with Iran, which began in late February, October recorded the highest number of attacks on ships passing through the Strait of Hormuz since hostilities started. Oil prices have stayed above US$100 a barrel, rising almost to $117.
On the same day, Brent fell nearly 4 percent to nearly $109 after reports that Washington was willing to give diplomacy more room, with talks brokered by Qatar. Analysts, however, warn that nearly a billion barrels of global inventories, along with diesel markets the International Energy Agency described as tight “well into next year”, have set a floor under prices even if a deal is reached.
How the oil shock reaches Pakistan’s import bill
The report outlines several channels through which the risks reach Pakistan. The first is the import bill. The country imports most of its crude and much of its LNG from the Gulf, and the war has kept fuel prices high, including after damage to Qatar’s Ras Laffan complex slashed its LNG output by roughly 17 percent.
A more expensive dollar and more expensive oil together put pressure on reserves and the trade deficit. The second channel is safe-haven flows. The dollar gained upward momentum in the early days of the war as emerging-market currencies tightened, a pattern that encourages hedging and pre-emptive dollar buying in Pakistan.
