Monetary policy tightening pushes rupee to historic low of 177.98

• Rupee falls to 177.98 against the US dollar amid reluctance of SBP to intervene in the foreign exchange market.
• Inflows, which were available in the market, were not sufficient to cover the demand side.
• With a fresh decline of 0.06%, the rupee has depreciated by 12.97% since July 1, 2021.

KARACHI: The rupee fell to 177.98 against the US dollar on Wednesday amid the reluctance of the central bank to intervene in the foreign exchange market to ease the pace of the currency's decline.

On Tuesday, according to data released by the State Bank of Pakistan (SBP), the rupee closed at 177.88 against the US dollar in the interbank market.

Currency dealers said a continual surge in the dollar demand for import payments weighed down on the local unit. Inflows, which were available in the market, were not sufficient to cover the demand side.

“There was a mismatch between the demand and the supply of the greenback. The central bank refrained from intervening in the market to lend support to the currency,” said a forex trader.

Traders were awaiting the announcement of the Monetary Policy Committee meeting where the central bank raised the policy rate by 100 basis points to 9.75%, which was largely in line with the market expectation.

The rupee has maintained a downtrend for the past seven months. It has lost 16.88% (or Rs25.71) to date, compared to the 22-month high of Rs152.27 recorded on May 14.

With a fresh decline of 0.06%, the rupee has depreciated by 12.97% (or Rs20.44) since the start of the current fiscal year on July 1, 2021, data released by the central bank revealed.

Analysts predict the local currency will remain under pressure as it is hit by concerns about trade and current account deficits and external factors.