The rupee has continued to fall against the dollar, reaching an all-time low of Rs221 in the interbank market. According to the Forex Association of Pakistan (FAP), the greenback was up Rs5.8 against the previous day’s close of Rs215.20 to reach Rs221 around 12:00pm. This is the second day in a row that the rupee has reached a new low against the dollar.
Mettis Global Director Saad Bin Naseer said the rupee was seeing a decline due to “panic buying [of the dollar] by banks in the interbank market”.
He said that “unease is setting in the financial markets following fears of change in [the] government in Punjab and Centre” after the by-polls on the province’s 20 seats. The by-elections saw the PTI register a resounding victory against the PML-N, which leads the ruling coalition.
He continued by saying that the downgrading of Pakistan’s outlook from stable to negative by the Fitch rating agency further stoked panic in the market. Furthermore, he said, the demand for the dollar among importers had also “surged” as the future of inflows from the International Monetary Fund, friendly countries, and bilateral sources remained uncertain.
FAP Chairperson Malik Bostan was more condemnatory of banks when asked about the rupee’s freefall.
He accused that banks were using the political situation in the country as an “excuse” and were involved in “satta bazi” (speculation) in the currency market.
“The State Bank should take notice of this and immediately impose restrictions on forward booking of dollars to put an end to the unnecessary rise in the value of the greenback in the market, as well as banks’ monopoly,” he said.
This, he added, would bring the “panic” in the market to an end.
Komal Mansoor, head of research at web-based terminal for financial markets Tresmark, said: “The floor for the rupee has vanished. This is senseless.”
She said that the central bank should intervene to stabilise abnormal movements, “otherwise risk contagion in all other aspects of the economy”.
Rupee’s fall
Within a brief few weeks after peaking at Rs211.93 on June 22, the dollar started to decline. It reached a low of Rs204.56 on July 4. However, the strength that the rupee gained from the $2.3 billion Chinese inflows evaporated quickly. The dollar snapped the rupee’s rising streak, gaining Rs2.38 in the interbank market on July 5. This was the first appreciation in the new fiscal year.
Monetary analysts attribute the sudden reversal in the value of the rupee to low inflows and import payments. On Monday, the dollar had appreciated in the interbank market to reach Rs215.20 from Rs210.95; however, the value of the rupee decreased the very next day.
In the first session, the greenback shot up to Rs217 but gradually came down to the level reported by the SBP. However, exchange companies reported that it closed at Rs216.20.
