During intraday trade today, the Pakistani rupee fell to its lowest level ever against the US dollar.
The Pakistani rupee fell during the first four hours of intraday trade today, with the interbank rate dropping Rs. 19 to 240.23 by 1 PM. After initial asks for the greenback opened at 247, open market rates across multiple currency counters reached highs of 250-251.
PKR depreciated by 9.61 percent at the close, closing at Rs. 255.43 after losing Rs. 24.54. Before the close, it hit an intraday low of 257 against the US dollar.
The local currency was red against the US dollar and opened trade at 244 in the open market. By midday, the dollar had risen to as high as 250 against the rupee. After 3 p.m., the local currency continued to fall and remained at 255 against the top foreign currency before the interbank close.
According to market sources, the local currency will be at the mercy of market forces today, following a broad consensus established in the previous two trading sessions that neither the SBP nor exchange companies will be able to control dollar movements against the PKR.
“It’s a belated adjustment of the currency that is extremely important to remove grey market attractiveness and increase USD flows away from hawala hundi,” said independent economic analyst A H H Soomro to ProPakistani. Once the interbank market is closer to the open market, remittances will drop sharply, easily bringing the current account into surplus”.
Aside from the government relinquishing its hold on the exchange rate, money changers see today’s massive drop as a surgical response to the International Monetary Fund’s (IMF) demand for a mini-budget worth Rs. 200-300 billion or it will not release the remaining funds under its $7 billion extended fund facility to the South Asian economy.
“The much-awaited PKR adjustment has been completed today by allowing banks to quote rates based on market demand-supply,” said Topline Securities CEO Muhammad Sohail. This was the case until September 2022, when the bank rate was kept in a narrow band, giving rise to the black market”.
“The black market rate is now approaching the bank rate. This will aid in the growth of exports and inward remittances via the banking channel. This could also help revive the IMF’s delayed 9th review and inflows from friendly nations,” he added.
Despite the market’s reaction to this week’s spiralling backlash against policymaking and SBP blockades, the country’s top finance executive has remained silent in order to avoid further chaos. Since the appointment of Ishaq Dar as Finance Minister on September 28, 2022, the PKR against the US dollar in the interbank market has moved in a narrow band and has shown signs of stability. In fact, PKR gained after falling to a low of Rs. 240 prior to his appointment because he believed the currency was undervalued.
In any case, money changers say today’s massive spiralling is due to a lack of dollars in the market, which has resulted in a significant widening of the spread between interbank and open market rates.
Since the start of the fiscal year 2022-23, which ends on June 30, the rupee’s official value has fallen by 12% against the US dollar. Currency controls are gradually slipping from the grip of the central bank and into the hands of a market-determined free float, according to current trends. ProPakistani predicted earlier that this would effectively end the influence of the black market, but stakeholders on both sides of the equation should brace themselves for PKR resistance in the sticky range of more than 250.
In the interbank market today, the PKR was bearish against all major currencies. It fell 6.5 percent against the Saudi Riyal (SAR), 6.7 percent against the UAE Dirham (AED), 17.7 percent against the Australian Dollar (AUD), 17.9 percent against the Canadian Dollar (CAD), and 27.5 percent against the Euro (EUR).
Moreover, it lost Rs. 32.4 against the Pound Sterling (GBP) in today’s interbank currency market.