End of Daronomics As PKR Crashes to All-Time Low After Biggest Ever Single Day Drop

History has been made as the Pakistani rupee crashed to its lowest ever against the US Dollar during intraday trade today.

The Pakistani rupee fell during the first 4 hours of intraday trade today with the interbank rate losing Rs. 19 to fall as low as 240.23 by 1 PM. Open market rates across multiple currency counters registered highs of 250-251 after initial asks for the greenback opened at 247.

At close, PKR depreciated by 9.61 percent and closed at Rs. 255.43 after losing Rs. 24.54. It quoted an intraday low of 257 against the greenback before close.

The local unit was crimson against the greenback and opened trade at 244 in the open market. By midday, the greenback moved higher against the rupee to as high as 250. After 3 PM, the local unit continued losses and stayed on the 255 level against the top foreign currency before the interbank close.

Market sources earlier touted the local currency to be at the mercy of market forces today after a wide consensus established in the past two trading sessions that neither SBP nor exchange companies would be able to control dollar movements against PKR.

Independent economic analyst A H H Soomro told ProPakistani, “It’s a belated adjustment of the currency that is extremely vital to remove grey market attractiveness and increase USD flows away from hawala hundi. Once interbank is closer to open market, you will see a sharp improvement in the remittances drop that will easily bring the current account to surplus”.

Besides the government’s releasing its hold on the exchange rate, money changers see today’s whopping decline as a surgical reaction to the International Monetary Fund’s (IMF) demand to promulgate a mini-budget worth Rs. 200-300 billion, to it won’t release the remaining funds under its $7 billion extended fund facility to the South Asian economy.

Topline Securities CEO Muhammad Sohail said, “The much-awaited PKR adjustment has been done today by allowing banks to quote rates based on market demand-supply. This was the case till Sep 2022 but later bank rate was kept in a narrow band that gave rise to the black market”.

“Now black market rate will come closer to the Bank rate. This will help in increasing exports and inward remittances through the banking channel. This may also help in reviving the delayed 9th review with IMF and inflows from friendly nations,” he added.

Amidst the market reaction to this week’s spiraling blowback toward policymaking and SBP blockades, the country’s top finance executive has remained quiet as he looks to avoid further chaos. Since the appointment of Ishaq Dar as Finance Minister on Sep 28, 2022, PKR against US$ in the interbank market is moving in a narrow band and was being managed to show signs of stability. In fact, PKR gained after touching a low of Rs. 240 before his appointment as he believed that PKR is undervalued.

In any case, money changers say today’s massive spiraling is due to a lack of dollars in the market which has caused the spread between interbank and open market rates to widen significantly.

The rupee’s official value has depreciated 12 percent against the dollar since the start of the 2022-23 fiscal year, which ends on June 30. Today’s trends show currency controls are slowly shifting from the clutches of the central bank to the mercy of a market-determined free float. ProPakistani called it earlier that this may kill the influence of the black market for good, but stakeholders on both ends of the equation should be ready to see PKR forming resistance in the sticky range of beyond 250.

The PKR was bearish against all of the other major currencies in the interbank market today. It lost Rs. 6.5 against the Saudi Riyal (SAR), Rs. 6.7 against the UAE Dirham (AED), Rs. 17.7 against the Australian Dollar (AUD), Rs. 17.9 against the Canadian Dollar (CAD), and Rs. 27.5 against the Euro (EUR).

Moreover, it lost Rs. 32.4 against the Pound Sterling (GBP) in today’s interbank currency market.