Rupee continues to be on slippery ground, hits new historic low of 178.24

• Currency dealers believe that recent measures taken by SBP have helped stabilise the rupee.
• Rupee has depreciated by 13.13% since July 1, 2021.
• Traders are likely to monitor how govt brings down trade deficit in the coming months.

The Pakistani rupee on Wednesday continued its downward slide against the US dollar, dropping to an all-time low of Rs178.24 in the interbank market at the close of the trading session.

The plunge came on the back of a mammoth import bill for November and widened the current account deficit.

According to the State Bank of Pakistan (SBP), the rupee had closed at Rs178.19 on Tuesday.

The rupee has maintained the downtrend for the past seven months. It has lost 16.82% (or Rs25.67) to date, compared to the 22-month high of Rs152.27 recorded on May 14.

With a fresh decline of 0.03%, the rupee has depreciated by 13.13% (or Rs20.7) since the start of the current fiscal year on July 1, 2021, data released by the central bank revealed.

A sharp rise in imports fuelled by global commodity prices and stronger domestic demand widened the trade deficit and resulted in the weakening of the local currency.

Currency dealers believe that recent measures taken by the State Bank of Pakistan (SBP), i.e., tightening of the regulations related to foreign currency buying and the frequent liquidity injections in the banking system have helped stabilise the rupee.

However, the fulfilment of the conditions imposed by the International Monetary Fund (IMF) as prior action before the sixth review of the $6 billion worth extended fund facility due on January 12 would be watched for cues.

Traders are also likely to monitor how the government brings down the trade deficit in the coming months.

Analysts expect the trade gap to widen further in the months to come, but the government is optimistic about trade balance prospects amid healthy remittances.

“The expected developments in export and import activities imply that the trade balance may gradually improve in the coming months and settle down at significantly lower levels in the second half of the current fiscal year,” said the Monthly Economic Update and Outlook December 2021, published by the finance division two days ago.