The US dollar continues its upward trend against the Pakistani Rupee for the fourth consecutive day, reaching a new all-time high in the interbank and open market on Tuesday.
In the interbank market, the dollar touched a high of Rs. 151.50 with an increase of Rs. 1.85 whereas, in the open market, the rate increased to Rs. 153.
In the last four business days, the dollar has risen by 7% or Rs. 10 against the Pakistani Rupee. Cumulatively, the Rupee weakened 41.8% or Rs. 44.15, since December 2017.
The Rupee has been falling against the dollar following an agreement with the International Monetary Fund on a $6 billion loan with strict conditions including a “market-determined” exchange rate.
The IMF had put up a condition to let the market forces decide the Rupee-Dollar exchange rate going forward. The implementation of this condition was a must to acquire the IMF board’s final approval for its 39-month long loan program worth $6 billion.
The Rupee’s official exchange rate is supported by the central bank under a de facto managed float system and many analysts consider the currency to be overvalued.
According to the Exchange Companies Association of Pakistan (ECAP), Secretary General Zafar Paracha said the central bank has let the rupee depreciate towards the most talked level.
Since the last Monetary Policy was announced, the exchange rate has depreciated by 5.93 percent to PKR 149.65 per USD, at the close of 20th May 2019, reflecting a combination of underlying macroeconomic factors and market sentiment considerations.
According to the State Bank’s data, the current account deficit narrowed to $9.6 billion in Jul-Mar FY19 as compared to a deficit of $13.6 billion during the same period last year, a fall of 29 percent. The reduction is mainly driven by import compression and healthy growth in workers’ remittances.
Consequently, reserves declined to $8.8 billion as of 10th May 2019 from $10.5 billion at end-March 2019.
State Bank further said the exchange rate also came under pressure in the last few days. In SBP’s view, the recent movement in the exchange rate reflects the continuing resolution of accumulated imbalances of the past and some role of supply and demand factors.
There were some rumors circulating around of currency exchange companies being closed down which was completely false according to the State Bank.
A spokesman for the State Bank said the reports circulating on social media that currency exchanges were being closed down and foreign currency would only be sold at banks are false.