The Pakistani currency briefly touched an all-time low at Rs299 against the US dollar in the inter-bank market on Tuesday.
The latest dip in the rupee’s value will make imports further expensive and more resources will be required to repay maturing foreign debt.
The local currency weakened against the greenback in the wake of the US dollar strengthening in the global market and due to its rising demand in the domestic economy.
Arif Habib Limited reported the “Pakistani rupee touches all-time low…at Rs298.9/$”.
To recall, the exchange rate hit a record low at Rs298.93/$ after former prime minister Imran Khan was arrested for the first time in May 2023 and due to the subsequent deterioration of the country’s law and order situation.
The research house reported the currency hit a historical low at Rs313/$ in the open market, widening the difference between exchange rates in the two markets to Rs14 (around 4.5%), breaching through the IMF loan programme’s condition of maintaining the difference at 1.25% (around Rs4).
Market talk suggests that the rupee-dollar exchange rate would float around Rs300/$ under the ongoing fresh round of depreciation since the caretaker government came into power last week.
The currency, however, should stabilise at around the current level, said Director Research Chase Securities Yousuf M. Farooq, while talking to The Express Tribune on Monday.
The US dollar has spiked to more than a two-month high against peer currencies after global investors poured in a significant amount of capital into US treasury bills.
Read more: Rupee slides as caretakers assume charge
On the other hand, Pakistan has removed all restrictions on imports, increasing demand for the greenback in the domestic economy, as foreign exchange reserves still remain below two-month import cover at $8 billion at present.
Analysts said traders are making pending import payments that were partially mounting pressure on the local currency.
Experts said the demand for imports remains higher than the sum of export earnings and inflows of workers remittance. Accordingly, the balance of the current account dropped into a deficit of over $800 million in July after remaining in surplus in the prior four consecutive months (Mar-Jun 2023).
POST AUTHOR: Salman Siddiqui