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Rupee drops to historic low of Rs175.73 against US dollar

An AFP file photo of Pakistani currency.
An AFP file photo of Pakistani currency.
  • Pakistani currency is losing its value because of a demand-supply crisis after an expected current account deficit.
  • Local currency last dropped to record low of Rs175.26 against US currency on October 26.
  • Samiullah Tariq says rupee is trading around fair values these days, hardly any space left to drop more.

KARACHI: The Pakistani currency dropped Friday to an all-time low of Rs175.73 against the US dollar in the inter-bank market, as demand for the foreign currency stood higher than supply amid an increase in import payments, rising global commodity prices and uncertainty about the resumption of the IMF loan programme.

The local currency depreciated around Rs1.54 against the greenback to settle at Rs175.73 on Friday. Cumulatively, the local currency has lost around Rs5.76 during last seven days.

The local currency last dropped to a record low of Rs175.26 against the US currency on October 26.

The government has decided to let the market-based, flexible rupee-dollar exchange rate mechanism determine the value of the rupee against the US dollar, keeping in view the demand and supply of foreign currency in the inter-bank market.

The inter-bank market mostly meets the demand for import payments through receipts of export earnings and workers’ remittances sent home by overseas Pakistanis.

The rupee has maintained the downtrend for the past five months. It has lost 15.4% (or Rs23.46) to date, compared to the 22-month high of Rs152.27 recorded in May.

With a fresh decline of 0.88%, the rupee has depreciated by 11.54% (or Rs18.19) since the start of the current fiscal year on July 1, 2021, data released by the central bank revealed.

Speaking to, Pakistan-Kuwait Investment Company Head of Research Samiullah Tariq said that the local currency has once again plunged due to an expected current account deficit.

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“The real effective exchange rate (REER) – the country’s cost of external trade – has dropped to 93 points on the index, suggesting the rupee is trading around fair values these days and there is hardly any space left to drop more,” Tariq said.

Taking to his Twitter handle, senior journalist Shahbaz Rana wrote: “Mishandling of IMF talks [and] breakdown of communication channels have caused more damage to the economy than weak economic fundamentals.”

“[The] stock market is again bleeding today. The rupee is inching towards a historic low of Rs176/dollar. Urgent damage control is needed. PM office has to intervene,” he added.

Earlier, Arif Habib Limited head of research Tahir Abbas had said that the government needs to take immediate action because uncertainty has started prevailing in the market.

“Whenever there is uncertainty in the market, significant fluctuations are observed in the local currency,” the analyst had said.

Abbas had added that depreciation in the rupee also creates inflationary pressure, which is bad for the economy as surging inflation means that the import bill will widen and increase demand for the dollar.

“As soon as clarity regarding IMF is received, the marker will reverse its trend,” he had predicted.

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