Rupee Falls to Lowest Level in History After Ishaq Dar’s Petrol Bomb [Updated]

The Pakistani rupee (PKR) fell 2.81 percent against the dollar during intraday trade on Monday, falling as low as 270 against the greenback after Finance Minister Ishaq Dar announced a Rs. 35 per litre petrol price increase in a surprise move on Sunday.

This is the third consecutive intraday drop in which the PKR has lost Rs.7 or more against the US Dollar, as markets await the federal government’s meeting with the International Monetary Fund (IMF) delegation, which arrives tomorrow (January, 31st).

At the close, the rupee was down 2.61 percent against the US dollar, worth Rs. 7.03. It closed at an all-time low of 269.63, the local unit’s third record-breaking close in a row. since Thursday last week.

since Thursday last week.


The domestic currency has fallen by around 3% in the open market to a record low of 272 per US dollar, compared to Friday’s highs of 261-266 per US dollar. The rupee fell 12.5 percent in the previous week, but the majority of the drop occurred at the end of the week, when the currency was finally ‘freed’ against the US dollar in the inter-bank market. The PKR fell by Rs. 24.54 on Thursday and another Rs. 7.17 the next day.

On the condition of anonymity, a high-profile investment banker told ProPakistani that comparing REER to rupee value is pointless because the ratio has plummeted since the SBP’s late-night switch to the free float model. He stated,

Although exports are cheap, fluctuations in raw material imports have created headwinds in the economy’s inflationary impact. With the rupee heavily devalued against the dollar, the exports game has deteriorated in just two weeks. If the SBP fails to ensure reserve cover beyond its illogical PR game every two days, the exchange rate may rise further in February, making trade more expensive. For the time being, market fundamentals are complete, and some players (other than Bostan) expect the dollar to rise above 287-292 by mid-February.

As part of the conditions for reviving the IMF bailout, the local currency is expected to depreciate significantly. No one can predict how low the currency will fall under the free-float model.

The arrival of the IMF mission tomorrow is expected to slow the PKR slump, but this reprieve may only be temporary if Pakistan fails to satisfy the lender.

The IMF previously declined Pakistan’s request to send a team to complete the 9th review, instead directing the Finance Ministry to complete all prior actions first. Following the lender’s clear message, a Rs. 300 billion mini-budget was announced, and the PKR has been in a three-day slump.

In the interbank market today, the PKR was bearish against all major currencies. It fell 1.87 percent against the Saudi Riyal (SAR), 1.91 percent against the UAE Dirham (AED), 4.45 percent against the Australian Dollar (AUD), 5.18 percent against the Canadian Dollar (CAD), and 7.10 percent against the Euro (EUR).



Moreover, it lost Rs. 8.86 against the Pound Sterling (GBP) in today’s interbank currency market.

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