The US dollar in the interbank trading falls by Rs1.43 to Rs183.25 as the National Assembly members are going to elect new prime minister on Monday.
In the last two trading sessions, Pakistani rupee strengthened by Rs4.93 against the US dollar, after making all time high of Rs188.18 on Thursday.
The rupee’s decline, triggered by the nerve-racking political uncertainty unleashed by the sudden Cablegate-led dissolution of the National Assembly (NA) on April 3, stopped on April 8. And, the local currency also made some appreciable recovery against the US dollar.
On April 7, a landmark Supreme Court judgement restored the dissolved assembly and brought the weeklong political turmoil in the country to an end. Also on April 7, hours before the judgement, the State Bank of Pakistan (SBP) “in an emergency meeting” raised the interest rate by 250 basis points. The move was primarily aimed at containing inflation — 12.7 percent year-on-year in March up from 12.2 percent in February 2022.
What is next? The rupee’s quick recovery on April 8 is due, in large part, to the dollar selling by a few commercial banks on the insistence of the central bank. Can the SBP, with its forex reserves inadequate to cover even two-and-a-half months of merchandise imports bill, afford to intervene directly in the market? Obviously, the answer is no. Can the central bank persuade a commercial bank to sell dollars to rescue the rupee whenever it is under pressure? Again, the answer is no.
In just four working days (between April 3 and April 7) the rupee lost 2.23 percent value to the US dollar. But it had shed 1.26 percent value against the dollar just a week earlier. The recovery the rupee made on April 8 brought its value back to 184.68 to the dollar, up from 188.18 to the dollar — its all-time low. But behind this “managed” sharp recovery remains the fact that the local currency has lost more than 17.2 percent value against the dollar since the start of this fiscal year on July 1, 2021.