The Pakistani Rupee made a recovery after falling down to a historic low of Rs. 169.50 in the interbank rate against the dollar.
US dollar had reached its highest level in history against the Pakistani Rupee on Friday but couldn’t sustain the gain and was closed at Rs. 166.54 as State Bank of Pakistan came to rescue the rupee.
“Parity touched an all-time high of 169.50 but State Bank intervened to provide a huge supply of USD in the market which lent support to the Rupee. Along with the SBP, an exporter sold 50 million dollars at the interbank. The overall market was volatile throughout the session and we expect the same trend in the coming week,” said Yaqoob Abubakar, an analyst from Tresmark that tracks financial market.
A.A.H Soomro, managing director at Khadim Ali Shah Bukhari Securities, stated that without intervention, the currency decline would have gotten out of hand. “That’s the last thing the economy wants right now,” he added.
“This constitutes disorderly movement and warrants stability despite similar falls in regional currencies,” added Soomro.
Over the past week traders have dumped sovereign debt for cash, driving a surge in the other direction. Foreign investors were upset about the sudden decision of policy rate change by the central bank and resorted to panic selling of treasury bills (T-bills) as they wanted to keep cash in hand during global lockdowns.
It is pertinent to mention that the rupee had remained stable between October 2019 and March 2020 and was trading in the range of 154-156 under the market-based exchange rate regime.
The State Bank of Pakistan (SBP) lowered policy rate by a cumulative 225 basis points to 11 percent in two monetary policy announcements in a week.