The rupee has depreciated by some 3.5 percent during first eight months of current fiscal year in the wake of deteriorating economic and political environment. The State Bank said that the rupee suffered significant losses against dollar during the current fiscal year, and movements in the rupee and dollar exchange rate largely followed the same pattern as the foreign exchange reserves.
During the first four months of the current fiscal year Pak Rupee remained more or less stable and depreciation in the value of Rupee against the US dollar was only nominal. However, in November-February FY08 period, decline in the value of Rupee, mirroring pressures in the foreign exchange market.
The SBP believes that the deteriorating economic and political environment may have been responsible in large part for the steep fall in the value of Rupee. A portion of the decline seems to be driven by speculative activity in the forex market.
This prompted SBP to intervene in the market aggressively, helping reduce the day to day volatility in the exchange rate. However, these interventions were not aimed at arresting the fall in the value of Pak Rupee against the US dollar. Presently, Pak rupee has reached 63 equal to a dollar against the 59-60 in the start of the current fiscal year.
Due to the steep depreciation of Pak Rupee against US dollar, coupled with dollar depreciation in international markets, the Rupee also lost its value against major currencies as well. During July-February FY08, monthly Rupee depreciation against JPY averaged to 2.3 percent. Against Euro and Pound sterling, Rupee depreciated by 1.5 percent and 0.2 percent, on average.