Pakistani rupee (PKR) crashed to a new all-time low against the dollar today after the latest inflation estimates rattled markets, while talks with the International Monetary Fund (IMF) gathered steam.
The US Dollar rose as high as 272 in the open market. Later, the rupee depreciated by 0.93 percent and closed at 271.36 after losing Rs. 2.52 against the greenback. Today’s losses offset recent market consensus that the PKR is undergoing correction while it is actually taking a hammering due to a variety of both domestic and external factors.
Today’s losses come just a day after the PKR halted its 29-day losing streak when it lost over Rs. 35 between Wednesday and Friday.
The local unit was all red against the greenback and opened trade at 266.5. in the open market. By midday, the greenback moved higher against the rupee to as high as 271 After 1 PM, the local unit stayed at that level against the top foreign currency before the interbank close.
The rupee reported losses against the US Dollar today after the IMF revised upward the inflation rate for Pakistan, i.e, from 19.9 percent to 21 percent in 2023, attributing the raise to floods and exchange rate depreciation.
Money changers and experts were today of the unanimous view that high inflation, SBP interest rates, and import barriers had complicated exchange rate movements and consolidation cannot be expected until after the IMF disbursal which could happen as early as end-February, or March 2023. While that may cool domestic demand, it would take additional time to help the PKR recover from the lows of today.
Meanwhile, the IMF has rejected Pakistan’s request for a subsidy push in its circular debt management plan and asked to increase electricity prices to enhance tax revenue, which evidently had an impact on markets. Traders see the increased power tariffs to make fuel more expensive, and raw material imports to run industries even costlier, which may further bring carnage to the free-floating rupee.
The PKR was bearish against all of the other major currencies in the interbank market today. It lost 66 paisas against the Saudi Riyal (SAR), 68 paisas against the UAE Dirham (AED), Rs. 2.24 against the Canadian Dollar (CAD), Rs. 3.74 against the Australian Dollar (AUD), Rs. 5.92 against the Euro (EUR).
Moreover, it lost Rs. 4.7 against the Pound Sterling (GBP) in today’s interbank currency market.