The rupee depreciated against the US dollar on Tuesday, falling by Rs2.38 in the interbank market.
The State Bank of Pakistan (SBP) said the dollar closed at Rs206.94, up from the previous day’s close of Rs204.56, which translates into a depreciation of 1.15 percent for the rupee.
Zafar Paracha, the secretary-general of the Exchange Companies Association of Pakistan, said that the main reason the rupee is remaining under pressure is due to speculation by banks in the interbank market.
Zafar Paracha explained that these banks are wary because the country has still not received a loan from the International Monetary Fund (IMF).
He added that the central bank had also allowed banks permission for imports, which had caused an increased demand for the greenback. “This was not such a big demand […] but banks only believe in earning money regardless of whatever happens to the country,” he opined.
Mr. Malik Bostan, President of the Forex Association of Pakistan, has mentioned that the recent payments in oil have put a strain on the Pakistani rupee. He hopes to see the currency begin to strengthen starting from mid-July.
Mr. Bostan went on to say that the upcoming meeting of the central bank’s Monetary Policy Committee (MPC) on July 7th could increase the policy rate, which in turn would lead to more forward bookings of dollars by banks and further weakening of the rupee.
It is hoped that the International Monterey Fund(IMF) loan program will resume after the MPC’s announcement, which he said would stabilise the rupee.
Komal Mansoor, Head of Research at Tresmark, simply said that the “outflows before Eid holidays weakened the rupee.”
Saad Bin Naseer, Director of Mettis Global, a web-based financial data and analytics portal, attributed the rupee’s fall to “pre-emptive demand from importers ahead of the Eid holidays”.