The Pakistani rupee broke on Tuesday all records against the US dollar after shedding Rs3 in the open market as it surpassed the 204 threshold for the first time in its history, Forex Association of Pakistan data showed.
Meanwhile, it continued its downward slide against the US dollar, dropping to an all time low of Rs202.75 in the interbank market during intraday trade on the rising demand for the greenback due to import payments.
The local currency extended its decline as the demand for the rupee is higher compared to its supply due to import demand which has increased because of oil payments.
According to the State Bank of Pakistan (SBP), the rupee had closed at Rs200.06 on Monday.
Arif Habib Limited head of research Tahir Abbas said the currency is under pressure due to pending oil payments and rising oil prices in the international market.
“The plunge came on the back of a mammoth import bill and widened the current account deficit,” the analyst said.
Abbas added that the market is keeping a close eye on the developments regarding the International Monetary Fund (IMF) programme, which is expected to be revived after the announcement of the budget as the government is taking all possible steps to meet the conditions laid forth by the Fund.
The last time the rupee had breached the 202 mark was on May 26, when there was higher uncertainty over the revival of the IMF loan programme than now. The recent bearish spell began after the government hiked the price of petroleum products by a major Rs60 per litre as a result of removing subsidies — one of the main demands of the money lender.
Traders believe caution can be expected this week ahead of the unveiling of the federal budget for the fiscal year 2022-23 scheduled to be announced on June 10, with investors expecting IMF conditions of fiscal consolidation to dominate.
Renewed pressure on the rupee on an increase in fiscal-year-end dollar demand from importers and the corporate sector will keep the local currency under pressure.
The report about China’s $2.7 billion deposit placement, meanwhile, has failed to entice traders as they don’t see it as useful for fiscal or external support.