Tuesday Oct 26, 2021
KARACHI: The Pakistani rupee on Tuesday depreciated to Rs175.27 against the US dollar — "the lowest level since August 1947," according to one analyst — owing to an increase in demand for the foreign currency in the inter-bank market.
The currency lost 84 paisas or 0.48% to hit its lowest level of Rs175.27 against the greenback.
The rupee has maintained the downtrend for the past five months. It has lost 15.10% (or Rs23) to date, compared to the 22-month high of Rs152.27 recorded in May.
With a fresh decline of 0.48%, the rupee has depreciated 11.25% (or Rs17.73) since the start of the current fiscal year on July 1, 2021, data released by the central bank revealed.
Speaking to Geo.tv, Pakistan-Kuwait Investment Company Head of Research Samiullah Tariq said: "Demand for dollars is consistently higher than supply as Pakistan has incurred current account deficit since more than six months."
He clarified that this acts as a stabiliser as higher parity reduces demand for dollars as imports become expensive encouraging exports.
It is pertinent to mention here that the State Bank of Pakistan had adopted a flexible market-based exchange rate regime in 2019.
“The rupee is expected to remain under pressure if talks between the International Monetary Fund (IMF) and Pakistan remain inconclusive,” currency traders forecast, as they believe the massive depreciation of the rupee against the dollar was also caused by panic buying and forward booking by importers because of fears of a possible failure of IMF-Pakistan talks.
Traders also held higher imports coupled with rising commodity prices in the international markets responsible for the strengthening of the dollar against the rupee.
However, apart from the dollar demand by the importers, the panic selling and forward booking of the dollar is also contributing to the rupee depreciation against the greenback.
Earlier, Alpha Beta Core CEO Khurram Schehzad said there is a lot of uncertainty at the moment due to the energy crisis and costly imports of LNG and oil.
“It is uncertain to say when the currency will consolidate,” the analyst said, adding that the delay in IMF’s decision is also adding pressure to the currency.
Schehzad was of the view that as soon as the IMF programme resumes, other international financial institutions will also come on board and “this is important to increase liquidity”.
He added that the resumption of the IMF programme will give psychological support to the market.
The international crude oil prices are hovering above $85/barrel, which has been making imports of petroleum products for domestic needs pricier.