Pakistani rupee hits lowest to one-year against dollar

Pakistani rupee hit lowest to a nearly one-year low against the US dollar as the greenback hit Rs167 on Thursday, Pakistani media reported, as an air of uncertainty surrounding the exchange markets.

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The greenback touched its lowest against the rupee on May 9 when it was traded at Rs151.17. Since then, it has been appreciating and hit Rs167 on Thursday, just close to the highest price of Rs168.2 in August 2020, the Daily Dawn newspaper reported.

The value of the dollar has increased by 10.5 percent against the rupee in the last four months.
Bankers and currency dealers have been trying to understand why the rupee has been falling, despite growing foreign exchange reserves.

“It may be the widening trade deficit or fear of higher current account deficit in FY22 and increased requirement of US dollars for debt servicing, but right now the exchange rate is not stable,” a currency dealer in the interbank market told Dawn.

Nobody can ascertain the limit of the devaluation of the rupee, which is alarming as the inflow of high cost of imported goods is creating inflation, he added.

There has been no intervention from the State Bank of Pakistan (SBP) to stop the devaluation and bring stability to the rupee’s value. While presenting the monetary policy last month, SBP Governor Dr. Reza Baqir had said the current account deficit was going to be higher than FY21 and would be between 2-3 percent, while the exchange rate would respond to this deficit in the form of the dollar’s appreciation.

“We are not able to judge where the limit of this devaluation of local currency is, but there are concerns among the stakeholders about this strange exchange rate stability,” the Dawn report quoted a senior banker as saying.
Currency dealers in the open market were also unable to predict an end to the depreciation in the rupee’s worth.

On Thursday, the demand in the open market was still very low but the dollar got a higher price at Rs167.80, according to the report.

Pakistan’s trade deficit also widened by 133 percent to $4.05 billion in August, reflecting mounting pressure on the exchange rate due to higher demand for dollars for imports.