Rupee hits fresh all-time low, settles at 287.85 against US dollar

The Pakistani rupee hit a new record low on Wednesday amid ongoing political uncertainty and Islamabad’s inability to revive the crucial International Monetary Fund (IMF) programme.

As per the State Bank of Pakistan (SBP), the rupee closed at 287.85, a loss of Re0.56 or 0.19%. Earlier during the day the currency had touched 288.25 against the greenback.

This comes a day after the rupee hit a new historic low of 287.29 in the inter-bank market after a decline of Rs2.25 or 0.8%.

In a key development that took place after markets closed on Tuesday, the Monetary Policy Committee (MPC) of the SBP announced it was raising the policy rate by 100 basis points (bps) to an all-time high level of 21% to curtail rising inflation.

It did so believing that monetary tightening will help to achieve the medium-term inflation target; but domestic political uncertainty and global financial conditions may pose risks to this assessment.

Multiple factors are driving the negative trajectory of the Pakistani rupee against the US dollar, Zafar Paracha – General Secretary, Exchange Companies Association of Pakistan (ECAP) – told Business Recorder.

“The delay in resumption of the IMF programme is the leading factor. We have not seen any positive development on this front,” he said.

“Secondly, the domestic political situation remains volatile as stakeholders remain at loggerheads. Moreover, the country’s foreign exchange reserves, exports and remittance continue to decline, denting market sentiment.”

“And lastly, the recent reports from international lenders i.e. World Bank and Asian Development Bank on Pakistan is also impacting the market,” he said.

Paracha said that despite the currency depreciation, exports, remittances and Foreign Direct Investment (FDI) have not increased.

“Moreover, the currency grey market continues to prosper owing to wrong policies of the government,” he said.

Paracha highlighted that the government’s decision to impose curbs on imports was the right move in the current scenario. However, it allowed importers to arrange funds by themselves, which paved way for the grey market.

“Meanwhile, Exchange Companies (ECs) are barred from entertaining the importers. The government should have given an official window for the importers, to meet their funding needs.

“We can provide $500 million to importers on a monthly basis,” said Paracha.

Internationally, the US dollar was stuck near two-month lows on Wednesday as weak economic data bolstered views that the Federal Reserve is near the end of its tightening cycle.

The dollar index, which measures the currency against six peers, eased to a fresh two-month low of 101.43, after dropping 0.5% overnight. It was last at 101.53.

Oil prices, a key indicator of currency parity, rose on Wednesday, boosted by expectations of US crude inventory declines as well as the latest output cut targets set by the OPEC+ producer alliance.

Inter-bank market rates for dollar on Wednesday

BID Rs 287.85

OFFER Rs 290.00

Open-market movement

In the open market, the PKR lost 4.50 rupees for both buying and selling against USD, closing at 292.50 and 295.50, respectively.

Against Euro, the PKR lost 6.50 rupees for both buying and selling, closing at 318 and 321 respectively.

Against UAE Dirham, the PKR lost 90 paisa for buying and 1 rupee for selling, closing at 79.20 and 80.00, respectively.

Against Saudi Riyal, the PKR lost 1.20 rupee for both buying and selling, closing at 77.70 and 78.40, respectively.

Open-market rates for dollar on Wednesday

BID Rs 292.50

OFFER Rs 295.50