The rupee was knocked down further by the US dollar in the inter-bank market on Wednesday, as the local currency closed above 206 for the first time.
The rupee settled at Rs206.46, a depreciation of Rs1.3 or 0.63% against the greenback, as the currency market anticipated a further spike in inflation, while the dollar added strength internationally.
On Tuesday, the currency had settled at the then-record low of Rs205.16.
New all-time low for rupee, US dollar closes over 205
Globally, the dollar held near its overnight 20-year peak ahead of the outcome of the Federal Reserve policy meeting at which markets are pricing in an outsized 75-basis-point interest rate hike as policymakers try to rein in rampant inflation.
A key US currency index, which tracks its performance against six peers, was at 105.3 on Wednesday having hit 105.65 a day earlier, its strongest level since December 2002.
Meanwhile, back home, market experts said the rupee too is feeling the effects.
“Globally, inflation rate is moving upwards, as the US Fed is expected to raise the rate by 75 basis points, which is causing a rush towards the dollar,” Saad Khan, Head of Equities at IGI Securities, told Business Recorder.
At the same time, expectations of higher inflation in Pakistan along with the stalled bailout programme of the International Monetary Fund (IMF) are causing distress.
“Electricity and gas rates are expected to go up as well this month, which will ramp up inflation. However, resumption of funds from the IMF could help the rupee,” said Khan.
He added that recent statements from Finance Minister Miftah Ismail also paint a grim picture of the economy.
Addressing a conference, Miftah on Monday had said that the world perceived the country at a serious default risk and Pakistan's bond is being sold at below 80 cents.
He said other lenders have linked their loans to the IMF programme — something that was told to him by the World Bank during a meeting, with the message being reiterated by the Asian Development Bank as well.
Pakistan urgently needs funds in the face of dwindling foreign exchange reserves, which have reached $9.2 billion - enough for less than 45 days of imports.
The fall in reserves has put severe pressure on the rupee in recent weeks which has lost nearly 14% against the US dollar since March this year.
Inter-bank market rates for dollar on Wednesday
BID Rs 206.40
OFFER Rs 206.60
Open-market movement
In the open market, the PKR lost 1.50 rupees for both buying and selling against USD, closing at 206.50 and 208, respectively.
Against Euro, the PKR lost 3 rupees for both buying and selling, closing at 216 and 218, respectively.
Against UAE Dirham, the PKR lost 40 paisas for both buying and selling, closing at 56.50 and 57, respectively.
Against Saudi Riyal, the PKR lost 70 paisas for buying and 80 paisas for selling, closing at 55.30 and 55.80, respectively.
Open-market rates for dollar on Wednesday
BID Rs 206.50
OFFER Rs 208