The Pakistani Rupee (PKR) continues to deteriorate against the US Dollar (USD) in the interbank currency market. Today (3 August), it traded in the range of Rs. 163.55 to the USD to Rs. 164.42 to the USD, before settling at Rs. 163.89 to the USD at the end of the trading day.
The rupee fell by 22 paisas from yesterday’s (2 August) closing of Rs. 163.67 to the USD.
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Multiple factors are responsible for this landslide of the rupee, not just against the USD but also against the other major currencies. The trade deficit for July 2021 showed an increase of 81 percent to $3.06 billion, while the imports had also gone up by 47 percent to $5.41 billion in July 2021. Experts say that much will depend on the remittance numbers to squeeze the current account deficit.
Asad Rizvi, the former Treasury Head at the Chase Manhattan Bank, spoke to the media about this continued deterioration and said that the current account deficit is making it necessary for the government to continue borrowing, which is obviously weakening the currency.
He elaborated that while the demand-supply factor is also relevant here, the decline in remittances has also been an important factor. He said, “When oil prices fall, which I expect would ease in the next fortnight to one month, it will help the Rupee. But a lot of factors are involved in stabilizing the Rupee”.
He remarked that the obvious negative impact of this increase is that it will create inflationary pressures. On the other hand, the continued increase in imports will also translate into higher duties and consequently higher tax collection for the government.
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Other experts are expecting the inflationary impact to remain under control. A.A.H Soomro, the Managing Director at Khadim Ali Shah Bukhari Securities, told ProPakistani, “So far the PKR hasn’t dropped to new lows of Rs. 168 [to the USD]. This will not be majorly impacting inflation as the government is subsiding Petrol by Rs. 30/liter which is more of an inflationary event”.
The USD is gaining strength against world currencies on its own as well, which is another reason for the drop in the rupee’s value against it.
The PKR repeated yesterday’s trend of blanket losses against other major currencies except for the Canadian Dollar (CAD) and posted gains of 33 paisas against it today.
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The extent of the deterioration for the PKR today was also lower than it was yesterday. It lost 15.55 paisas against the Euro, 8.55 paisas against the Pound Sterling (GBP), and 61.27 paisas against the Australian Dollar (AUD). It also deteriorated by six paisas each against the UAE Dirham (UAE) and the Saudi Riyal (SAR) in the interbank currency market today.
