August 22, 2023 (MLN): Pakistan’s rupee declined to a new low on growing headwinds from a stronger greenback and deteriorating external finances, as Bloomberg reported.
The rupee dropped 0.6% to 299.01 per dollar on Tuesday making it the worst performer in Asia this year, slumping nearly 25% after a devaluation in January.
The currency is partly weighed down by the International Monetary Fund’s condition for a more market-determined exchange rate to secure financial aid.
Dollar demand is increasing and this is expected to continue in the near term after the government lifted import restrictions, said Yawar Uz Zaman, head of research at Pearl Securities Ltd.
Pakistan’s current account switched to a monthly deficit of $809 million in July after recording a surplus for four months, according to central bank data.
Factories have been forced to shutter for weeks since the South Asian nation slid into a crisis last year, with a dearth of dollars barring traders from importing raw materials.
Elevated consumer prices are hurting the outlook for the local currency, which may weaken further against the dollar, said Philip McNicholas, Asia sovereign strategist at Robeco Group in Singapore.
“Ultimately, this issue is linked more to the purchasing power of the PKR rupee and the country’s position as a price taker in global energy and food commodity markets,” said McNicholas.
