The KSE-100 Index tumbled around 1.50 per cent after setting a new high during early trading, as the high interest rates with no rate cuts in sight made investor resort to profit taking amid the Monetary Policy Committee (MPC) meeting being held on Monday.

The session started with the benchmark index setting a new high by crossing the 73,000 barrier and touching 73,300.75 against the previous closing of 72,742.74.

But the rout started soon afterwards, which peaked in the afternoon session, as the KSE-100 Index at one point slid to 71,602.94, thus down 1.55pc.

By the time trading was closed, it settled at 71,695.03, representing a net loss of 1.44pc or 1,047.71 points.

Read more: Pakistan interest rates likely to be maintained, IMF will formally approve release of $1.1bn

The latest losses came as investors, who resorted to profit taking after the previous week’s rally, eagerly awaited the MPC outcome and reasons cited by the central bank for the expected decision of not going for rate cuts while looking for a clue about future course of action. The next MPC meeting is scheduled for June 10.

Pakistan has been witnessing historic-high interest rates amid a persistent inflation crippling the economy and more energy tariff hikes on the cards, which will obviously fuel the existing inflationary pressure.

However, the diminishing hopes of rate cuts by the State Bank of Pakistan despite a declining inflation during the January-March period showed by the consumer price index (CPI) – a monthly gauge of prices – and a similar reading for April meant that the market couldn’t sustain the initial trend witnessed on Monday.

WHY RATE CUTS REMAIN A KEY DEMAND

It must be noted that the rate cuts will only give a much-needed boost of business activity but also prop up the rupee as lower interest rates make the dollar – the top safe-haven currency – less attractive, as the green back flourishes when the borrowing costs are high.

Read more: Dollar rally supercharged by US rate outlook, could complicate inflation fight for other economies

Hence, the rate cuts will also help reducing inflation which is mainly a product of expensive imports – a natural outcome of rupee devaluation.

That’s why interest rate cuts is the main demand made by business community against the IMF dictate which calls for monetary tightening along with liberalisation of currency market.

The yen jumped suddenly against the dollar on Monday, with traders citing yen-buying intervention by Japanese authorities to try to underpin a relentless tumble in the currency to levels last seen over three decades ago.

The dollar fell sharply to 155.01 yen from as high as 160.245 earlier in the day. Trade sources said Japanese banks were seen selling dollars for yen. It was last fetching 156.21 yen.

Traders had been on edge for weeks for any signs of action from Tokyo to prop up a currency that has fallen 11 per cent against the dollar so far this year. The yen’s plunge to 34-year lows has come despite a historic exit from negative rates last month as traders bet Japanese rates will remain low for some time.

Japan’s top currency diplomat Masato Kanda declined to comment when asked if authorities had intervened.

Read more: Japanese yen trips past 160 per dollar to April 1990 lows

“I won’t comment now,” Kanda, the vice finance minister for international affairs, told reporters.

Japan’s Ministry of Finance was not immediately available for comment, with markets in the country closed for a holiday on Monday.

“The move has all the hallmarks of an actual BOJ intervention and what better time to do it than on a Japanese public holiday, which means lower liquidity in USD/JPY and more bang for the Bank of Japan’s buck!”, said Tony Sycamore, Sydney-based market analyst at IG.

Bank of Japan Governor Kazuo Ueda told a press conference after a meeting last week that monetary policy does not directly target currency rates, although exchange-rate volatility could have a significant economic impact.

Read more: Powell dashes US rate cut hopes, says current policy needs more time to work

The yen had moved nearly 3.5 yen between 158.445 and 154.97 on Friday as traders vented their disappointment after the Bank of Japan kept policy settings unchanged and offered few clues on reducing its Japanese government bond (JGB) purchases – a move that might have put a floor under the yen.

The yen has been under pressure as US interest rates have climbed and Japan’s have stayed near zero, driving cash out of yen and into dollars to earn so-called “carry”.

Read more: Stocks wobble as interest rates remain the main focus

The suspected intervention comes just days ahead of the Federal Reserve’s May 1 policy review, with investors already anticipating a delay in Fed rate cuts after a batch of sticky US inflation data and as officials including Chair Jerome Powell emphasise even those plans are dependent on data.

Japan intervened in the currency market three times in 2022, selling the dollar to buy yen, first in September and again in October as the yen slid towards 152 to the dollar, a 32-year low at the time. Tokyo is estimated to have spent as much as 9.2 trillion yen ($60.78 billion) defending the currency.

The United States, Japan and South Korea agreed earlier this month to “consult closely” on currency markets in a rare warning and Tokyo has stepped by its rhetoric against excessive yen moves.

The yen has also hit multi-year lows against the euro, Australian dollar and Chinese yuan.

“Today’s move, if it represents intervention by the authorities, is unlikely to be a one-and-done move,” said Nicholas Chia, Asia macro strategist at Standard Chartered Bank in Singapore.

“We can likely expect more follow through from MOF if USD-JPY travels to 160 again. In a sense, the 160-level represents the pain threshold, or new line in the sand for the authorities.”

 For millions across the heartland of South America, bitter-tasting yerba mate tea is a beloved staple of social gatherings and morning routines. But here, in the steamy grasslands of Argentina’s northeast Misiones Province, mate is also a way of life — literally.

For generations, low-paid labourers known as “tareferos” have toiled in the forests of Misiones, the mate capital of the world. They get paid by the weight, so each morning, the race is on. From dawn to sundown, they cut a seemingly endless harvest of the hardy leaves and stuff them into white bags until they burst at the seams. After being dried, packaged and trucked off, the herbs spread to virtually every Argentine household, office and school — as well as to neighbouring Brazil, Paraguay, Uruguay and farther afield.

For tareferos, mate is mostly a commodity, sold for $22 a ton. But workers also sip the infusion during breaks in the fields, its caffeine helping them stay energized. The gruelling work in north-eastern Argentina dates back to the arrival of the Spanish, when Indigenous tribes worked Jesuit plantations in what is now Paraguay.

“Yerba mate gives us harmony and strength,” said Isabelino Mendez, an Indigenous village chief in Misiones. “It’s part of our culture.”

Argentina’s government has long supported the mate industry with price controls and subsidies, keeping farmers’ incomes higher than they would be if subjected to free-market competition.

But this year, libertarian President Javier Milei’s draconian financial measures to fix the economy have thrust mate producers and tareferos alike into uncertainty. To downsize the state, Milei seeks to scrap price controls and other regulations affecting a range of markets, including yerba mate.

Small producers fear that big companies will set prices they can’t afford to match and push them out of the market.

Julio Petterson, a mate producer from the northern Andresito village, fears a repeat of the 1990s, when similar liberal policies wreaked havoc on small producers. “We barely survived,” he said. “Thousands of other producers went bankrupt.”

Workers say they’re bracing for mass layoffs.

“If the government deregulates prices, this will harm the producers who own the land and, ultimately, we’ll lose our jobs,” said 40-year-old Antonio Pereyra Ramos, who oversees 18 workers. “The economic crisis is hitting us hard.”