PKR continued its losing streak against the US dollar in the interbank and shed PKR1.11 (-0.67%) during the last week. Mainly due to volatile situation in neighbouring Afghanistan and high import bill.
According to the SBP, the US dollar opened at PKR166.91 on Monday last in the interbank. And closed at PKR168.02 on Friday, the last working day of the week.
Overall, the Pakistani rupee’s depreciation during the fiscal year 2021-22 has been PKR10.66. The local unit has shed PKR7.83 against the US dollar in the current year 2021. The rupee has depreciated 6.2% since June 2021. Its devaluation has been 9.4% since May 14, 2021 when it reached its recent high against the US dollar at around 152 mark.
During the last week, the rupee weakened by 32 paisas (-0.19%) against the US dollar on Monday. It closed at PKR167.23. The local united continued its losing streak on Tuesday and weakened by 40 paisas (-0.24%). However, the rupee turned around on Wednesday against the US dollar and gained 38 paisas (+0.23%) on Wednesday.
However, the rupee was back on track of a losing streak on Thursday which continued till Friday. PKR shed 41 paisas (-0.24%) on Thursday and 36 paisas (-0.21%) on Friday. As a result of struggling for four out of five days, the rupee has hit its lowest level against the US dollar since August 26, 2020. The dollar made the historic high against the rupee at PKR168.44 on August 26, 2020. Within the open market, the rupee was traded at PKR168.20/169 per dollar.
Reasons for PKR Depreciation
The rupee has been witnessing sharp decline due to dismal trade data during the last two months, situation in Afghanistan and higher import bill. The country faced a trade deficit of $4.229 billions in the second month of the fiscal year 2021-22, which surged by 144.17% on a year-on-year (YoY) basis in August 2021 as compared to a deficit of $1.732 billions recorded in August 2020. According to the data released by Pakistan Bureau of Statistics (PBS), the trade deficit on a month-on-month basis surged by 29.68% in August 2021 against a deficit of $3.261 billions recorded in July 2021.
Although the exports from the country witnessed an increase of 41.04% during August 2021 as compared to the corresponding month of last year, they declined by 4.53% as compared to the previous month’s exports.
According to currency experts, the rupee is under immense pressure due to unfavourable macro-economic data and Afghanistan’s situation. They said that the rising deficit in the current account is also a major concern for the market. They said that dollar outflow to Afghanistan was also a big concern for rupee stability. However, in order to address the Afghan trade problem, the federal government decided last week to trade Afghanistan in the Pakistani rupee.