The interbank market witnessed a sharp increase in the US dollar rate taking it to record high Rs 122.25 on Thursday, according to Forex Association of Pakistan.
On Monday, the US dollar closed at Rs 119.84, after reaching a record high of Rs 121 earlier in the day, the State Bank of Pakistan reported.
The rupee is now Asia’s worst-performing currency this year, data compiled by Bloomberg shows.
The movement is based on foreign exchange demand-supply gap in the interbank market, the central bank said.
Some analysts expect the currency to drop further. Analysts say Pakistan’s economic growth will slow in 2018 for the first time in six years. The nation’s foreign-exchange reserves have dropped to the lowest in more than three years.
Increasing imports and a widening current account deficit were cited as the reasons for the hike in the value of the foreign currency.
Despite the continued growth in exports (13.3 percent in Jul-Apr FY18) and some uptick in remittances, growing imports have pushed the current account deficit to US$ 14.0 billion during the first ten months of FY18, which is 1.5 times the level of deficit realized during the same period last year, SBP said.
Devaluation increases the impact of government levies on imports, but if products are being imported at 10-25 percent of their actual values, the impact would not be so sharp and imports would remain viable.
The bank said this market-driven adjustment in the exchange rate along with other recent policy measures are expected to restrain the imbalances in the external account, thereby containing aggregate demand and also facilitating the prospects for generating non-debt creating inflows.
US dollar had hit a record high of Rs 120 per USD in interbank trading on Monday morning.
In March, the US dollar shot up by Rs 4.93 in the inter-bank market to hit a high of Rs 115.5 before coming down to Rs 115 at the close of business.
Since December, the rupee has depreciated by about 14 percent.
Moody’s Investors Service – one of top three global credit rating agencies – forecast that Pakistan’s rupee could shed value by another 7.75% and its worth may drop to Rs 125 against the dollar by June next year.