KARACHI: The Pakistani rupee fell to a historic low against the US dollar on Friday, with the exchange rate falling to Rs176, after a Rs1.81 drop in intra-day trading due to current account deficit pressure. Pakistan Rupee goes low against 176 US Dollar.
The sharp drop ascribed to panic buying of dollars due to concerns over the greenback’s availability.
Analysts believe demand for foreign currency outstripped supply due to increased import payments. Rising global commodity prices, and uncertainty over the IMF loan program’s continuation.
On October 26, the local currency hit a record low of Rs175.26 against the US dollar.
The government has decided to leave the value of the rupee against the US dollar to the market-based, flexible rupee-dollar exchange rate mechanism, which takes into account the demand and supply of foreign currency in the interbank market.
Pakistan Rupee goes low against 176 US Dollar
The interbank market primarily meets demand for import payments by receiving export revenues and workers’ remittances sent home by Pakistanis working abroad.
Samiullah Tariq, Head of Research at Pakistan-Kuwait Investment Company, told Geo.tv that the local currency has once again fallen due to an expected current account deficit.
“The real effective exchange rate (REER) – the country’s cost of external trade – has plummeted to 93 points on the index, implying that the rupee is trading around fair values. These days and that there isn’t much room for further depreciation,” Tariq said.
Tahir Abbas, the head of research at Arif Habib Limited, had stated that the government must act quickly since market uncertainty has begun to reign.
“Whenever there is market uncertainty, big movements in the local currency are witnessed,” the expert had stated.
Abbas went on to say that the rupee’s devaluation causes inflation, which is negative for the economy because rising inflation implies the import bill will spread, increasing demand for the dollar.
“As soon as the IMF situation is clarified,” he said, “the marker will reverse its trajectory.”
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