Rupee streak of new lows enters 7th session, hits 304.45 vs $

KARACHI: Setting of new lows of Pakistani rupee against the US dollar in the interbank market continued unabated for the seventh straight session and the local unit plunged to yet another low of 304.45 on Wednesday, depreciating by Rs1.40 (-0.46 percent).
The State Bank of Pakistan (SBP) said in a tweet that the rupee opened at 303.05 against the dollar in the interbank market and closed at 304.45.
The rupee has been witnessing the all-time lowest levels against the dollar for the last seven sessions. Earlier, the rupee hit all-time lows of 303.05 on Tuesday, 302 on Monday, 301 on Friday, 300.22 on Thursday, 299.64 on Wednesday and 299.01 per dollar on Tuesday last.
The rupee depreciated against the US dollar in the interbank market by Rs5.22 last week, Rs18.46 during the current fiscal year 2023-24, and Rs77.02 in the current year.
Similarly, the local unit depreciated against the greenback in the open market by Rs4 (-1.27 percent). The rupee was quoted in the range of 320-323 against the dollar in the open market as compared to 316-321 a session earlier. In the black market/Hundi, the dollar surged to Rs340 as compared to Rs338 in the previous session.
Due to the latest depreciation, the gap between the interbank and open market rate has risen to over 5 percent and has exceeded the recommended 1.25 percent threshold set by the International Monetary Fund (IMF). Recalling the IMF staff report issued on July 18, 2023, a market-determined exchange rate was recommended to absorb external pressures. Consequently, the government’s ability to control the rupee through trade restrictions has been limited.
According to currency experts, the demand for the dollar remained high as imports are opening up gradually. They said the rupee’s recent decline can be attributed to the removal of restrictions on letters of credit (LCs), which has led to an increased demand for dollars and subsequently weakened the rupee. They said that the local unit continues to face immense pressure amid political uncertainty surrounding the general elections, which is causing turbulence in local markets.
On the other hand, foreign exchange reserves held by the SBP decreased by $125 million on a weekly basis, clocking in at $7.93 billion as of August 18. Total liquid foreign reserves held by the country stood at $13.25 billion. Net foreign reserves held by commercial banks stood at $5.32 billion. The central bank cited debt repayments as the reason for the decrease in the foreign currency reserves. – TLTP