KARACHI: Pakistani rupee snapped a long losing streak against the US dollar in the interbank market with an uptick of 7 paisas (+0.02 percent) on Friday. The State Bank of Pakistan (SBP) said in a tweet that the rupee opened at 303.54 against the dollar in the interbank market and closed at 305.47. The rupee registered eight consecutive all time lows against the US dollar in the interbank market prior to this appreciation. The rupee depreciated against the US dollar in the interbank market by Rs4.47 this week, Rs19.48 during the current fiscal year 2023-24, and Rs78.04 in the current year. However, the local unit depreciated against the greenback in the open market by Rs5 (-1.54 percent). TLTP
The rupee was quoted in the range of 324-329 against the dollar in the open market as compared to 321-324 a session earlier. In the black market/Hundi, the dollar surged to Rs345 as compared to Rs341 in the previous session.
The consistent devaluation of the rupee is not only causing inflation but is also compelling the central bank to raise interest rates to mitigate the repercussions of uncontrolled depreciation of the local currency, according to bankers who manage exchange rates and imports.
“The market is not in control of anyone. The steep devaluation will continue and even cross the limit given by the IMF,” a senior banker said, adding that nobody knows what is next for the exchange rate. According to currency dealers, this fast deprecation of local currency is alarming for the government in charge. There must be some pause in the frequent free fall of the rupee,they added.
Due to the latest depreciation, the gap between the interbank and open market rate has risen to over 5 percent and has exceeded the recommended 1.25 percent threshold set by the International Monetary Fund (IMF). Recalling the IMF staff report issued on July 18, 2023, a market-determined exchange rate was recommended to absorb external pressures. Consequently, the government’s ability to control the rupee through trade restrictions has been limited.
Meanwhile, foreign exchange reserves held by the SBP decreased by another $81 million on a weekly basis, clocking in at $7.85 billion as of August 25, data released on Thursday showed. Total liquid foreign reserves held by the country stood at $13.17 billion. Net foreign reserves held by commercial banks stood at $5.32 billion. The central bank cited debt repayments as the reason for the decrease in the foreign currency reserves.
Earlier, Pakistan’s sovereign dollar bonds slid on Thursday amid a broader emerging market debt rout. The 2031 maturity fell the most, by 2.5 cents, but several were down by 2 cents or more, according to Tradeweb data.
