Continuing its downward slide, the Pakistani rupee dropped to an 11-month low against the US dollar after a fresh 0.65% fall on Wednesday.
The currency closed at 166.28 against the US dollar in the inter-bank market after a decrease of another Rs 1.1 or 0.65%, as per the State Bank of Pakistan (SBP).
The US dollar last hit the 166 level back in September last year. The Pakistani rupee has now depreciated 5.3% since June 2021, and 8.4% since its recent high against the dollar, according to AHL Research.
The rupee saw moderate volatility in session and traded in a range of 1.00 rupee per USD, showing an intraday high bid of 166.30 and an intraday low offer of 165.40. Within the open market, the rupee was traded at 166/166.20 per USD. According to the data compiled by Mettis Global, the home unit has weakened by 5.25% and 3.88% in FY22 and CY21, respectively with the month-to-date (MTD) position showing a depreciation of 2.98%.
The PKR has been on a downward trajectory since May 2021, with the rising import bill and a widening current account deficit putting pressure on the rupee.
Samiullah Tariq, Head of Research and Development at Pakistan Kuwait Investment Company Limited, said the market-based exchange rate is determining the value now. “Since the implementation of the flexible exchange rate in 2019, flows from international lenders as well as international markets cannot be used to defend the currency,” he said, and added that the increase in demand of dollar and drop in supply amid import payments has increased the pressure on PKR. He was of the view that the exchange rate would stabilise at 167-168 level. In a tweet, Asad Rizvi, former treasury head-chase Manhattan Bank said, “After receiving $2.75 billion from IMF under new SDR allocation, the market expected that the direction of PKR would change as central bank’s reserves reached an all-time high.” He noted that SBP’s version is very clear – it is the demand-supply factor that determines the exchange rate.
On Tuesday, the SBP had said it has received $2.75 billion from the International Monetary Fund (IMF) as part of the newly allocated Special Drawing Rights (SDR). Many believed this would help the currency, but the introduction of a market-based exchange rate, where supply-and-demand factors determine the movement, has meant that this was not going to be the case. Meanwhile, the currency lost 2 rupees to the pound sterling as the day’s closing quote stood at PKR 228.36 per GBP, while the previous session closed at PKR 226.33 per GBP.