US dollar's onslaught against the Pakistani rupee continued as the local currency closed near the 225 level in the inter-bank market on Wednesday.
As per the State Bank of Pakistan (SBP), the rupee closed at 224.92 against the dollar, a depreciation of 1.3% or Rs2.93. This is now the lowest closing level for the currency, beating the one it registered on Tuesday.
This was also the fourth successive fall for the rupee, which has depreciated nearly 6.7% since Thursday last week.
On Tuesday, Pakistan's rupee closed at the then-record low of 221.99 against the US dollar, going as low as 224 during intra-day trading amid renewed political uncertainty that wrecked market confidence and also gave "speculators" additional fodder. The political uncertainty stemmed from the results of the Punjab by-polls in which the Pakistan Tehreek-e-Insaf (PTI) registered a resounding victory over the Pakistan Muslim League-Nawaz (PML-N), which is currently leading the coalition-led government.
The political turmoil along with sentiment that economic reforms agreed with the International Monetary Fund (IMF) would be put on the backburner have hurt investor sentiment, a fact also reflected at the Pakistan Stock Exchange that registered massive back-to-back falls on Monday and Tuesday.
Meanwhile, in a reaction to rupee's depreciation, the SBP in a late-night announcement on Tuesday said the recent rupee depreciation against the US dollar was "in large part a global phenomenon", adding that in real effective terms, the "depreciation in the rupee value since December 2021 has only been 3%."
"This is a better measure of the strength & competitiveness of a currency than the US$ rate," the SBP said on its Twitter account.
In a series of tweets, SBP said the recent movement in the rupee value was a feature of a market-determined exchange rate system.
"Under this system, the current account position, relevant news items, and domestic uncertainty together determine daily currency fluctuations," it highlighted.
It further said that globally, the US dollar has surged by 12% in the last 6 months to a 20-year high, as the "Fed has aggressively raised interest rates in response to rising inflation."
"Like most advanced and emerging market currencies across the world, the Rupee has depreciated against the US$ since Dec 21," it said, adding: "It has depreciated by 18% over this period."
However, the statement noted that when evaluated in real effective terms against a basket of currencies in which Pakistan trades and adjusts for inflation, the depreciation in the rupee since Dec 21 has only been 3%.
In his bid to pacify the markets, Finance Minister Miftah Ismail in a press conference on Wednesday also said the rupee’s sharp fall was solely due to the political crisis in the country, as the country’s economic fundamentals remain stable.
“Dollar is rising against all currencies. In fact, dollar is at 22-year high against a basket of strong global currencies,” said Miftah.
However, economic analysts and the business community remained concern over currency's sharp decline.
Zafar Paracha, General Secretary at the Exchange Companies Association of Pakistan (ECAP), reiterated that the ongoing fall of the local currency seems to be a part of IMF's prior conditions.
“There is no demand for the dollar in the market, as there are no major payments in the pipeline,” he told Business Recorder.
“Inflation will now rise further, whereas the cost of production would go up as well."
Inter-bank market rates for dollar on Wednesday
BID Rs 225.20
OFFER Rs 226.20
Open-market movement
In the open market, the PKR lost one rupee for both buying and selling against USD, closing at 223 and 225, respectively.
Against Euro, the PKR lost 6 rupees for both buying and selling, closing at 226 and 228 respectively.
Against UAE Dirham, the PKR lost 30 paisas for both buying and selling, closing at 60.30 and 60.80, respectively.
Against Saudi Riyal, the PKR lost 30 paisas for both buying and selling, closing at 58.30 and 58.80, respectively.
Open-market rates for dollar on Wednesday
BID Rs 223
OFFER Rs 225