The dollar initially traded at Rs240 in the interbank market on Friday as the government’s position regarding the IMF agreement and other economic measures remained unclear. This contributed to the rupee’s continued to decline against the US dollar. The US dollar increased by Rs0.06 to trade at Rs240 in the interbank market, according to forex dealers. “The banks are selling US dollar at Rs242 while in the open market, it being exchanged between Rs242 and Rs244,” they said.
Following the election of CM Punjab Parvez Elahi, the dollar continued to rise in value on Thursday despite political unpredictability regarding the federal government’s future and the IMF deal. It increased by Rs3.92 in interbank trading today to trade at Rs239.94. At one point during the day, the dollar also crossed the Rs240 mark.
The forex dealers said that the banks are selling the greenback at Rs242 while in an open market, it being sold between Rs242 and Rs244.
Interbank closing #ExchangeRate for todayhttps://t.co/3HKHwEmKLf pic.twitter.com/OZl2VqDeLR
— SBP (@StateBank_Pak) July 28, 2022
In an apparent attempt to downplay the depreciation, the SBP said a “better measure” of the rupee’s strength is the real effective exchange rate, which takes into account the currencies in which Pakistan trades in inflation-adjusted terms.
Earlier, the State Bank of Pakistan (SBP) attributed the 11-rupee change in the exchange rate in just two days to the “market-determined exchange rate system” under which the current account position, news stories, and domestic uncertainty contribute to the daily currency fluctuations.
On the other side, several Asian central banks must raise interest rates rapidly because inflationary pressures are rising due to a global surge in food and fuel costs caused by the war in Ukraine, said a senior International Monetary Fund (IMF) official.
“Asia’s growing inflation pressures remain more moderate compared with other regions, but price increases in many countries have been moving above central bank targets,” Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, wrote in a blog published on Thursday.
“Several economies will need to raise rates rapidly as inflation is broadening to core prices, which exclude the more volatile food and energy categories, to prevent an upward spiral of inflation expectations and wages that would later require larger hikes to address if left unchecked,” he said.
Most emerging Asian economies had experienced capital outflows comparable to those in 2013 when global bond yields spiked on hints by the U.S. Federal Reserve that it might taper bond buying sooner than expected, Srinivasan said.