The Pakistani rupee on Wednesday plunged to a new low against the US dollar, which continued to strengthen for the ninth straight session during intraday trade in the interbank market.
The local unit is trading at Rs236.50 in the interbank market, up from Rs232.93 a day earlier, as it shed Rs3.57.
The rupee has been one of the world’s worst-performing currencies, slumping more than 30% since the start of the year 2022.
But its depreciation is not limited to local dynamics as the greenback is now at a 20-year high against other currencies, thanks in part to expectations that the Federal Reserve will increase its interest rates faster than most.
Apart from that, traders said that continuously deepening political uncertainty and the lack of dollar liquidity yielded pressure on the local unit.
“Banks are short of foreign currency as the central bank is not selling dollars to the market to curb the exchange rate volatility. Exporters are also not converting dollars and that has resulted in the scarcity of the greenback,” a foreign exchange trader said.
“Some banks are opening fresh letters of credit if the outflow is equalised with the export proceeds of the clients.”
Fears about Pakistan’s faltering economy have increased as the country’s currency dropped by about 8% versus the US dollar last week, its foreign exchange reserves decreased to $9.3 billion as of July 15, and inflation is at its worst level in more than a decade.
Alpha Beta Core CEO Khurram Schezad said that the dollar is getting stronger in the global market almost against all the world currencies — and the rupee is not an exception.
In addition, he said, Pakistan’s external account issues are not settled as yet though imports are slowing.
He noted that although the International Monetary Fund is on board for disbursement, the flows are yet to materialise as the Executive Board’s final approval is awaited.
“Global rating agencies have put a negative outlook on the economy, so that is an additional burden that is weighing in on the financial markets in general and forex market in particular,” he added.
Meanwhile, an importer claimed that the banks were fleecing them as they demand “extra money” for opening letter of credit.