January 26, 2023 (MLN): The Pakistani rupee (PKR) took a steep dive on Thursday in both interbank and open market sessions. The local unit in the interbank has depreciated by a massive 24.5 rupees against the US dollar as the currency settled the day's trade at PKR 255.43 per USD, marking a significant drop from yesterday's closing of PKR 230.89 per USD.
To note, the biggest single-session decline was witnessed on October 26, 1998, when the rupee slipped by 9.9%.
The rupee also faced a highly volatile trading session with quotes being recorded in a range of 25.35 rupees per USD, reaching an intraday high bid of 256.25 and an intraday low offer of 231.15.
The situation in the open market was no different, with the PKR being traded at 258/262 per USD.
The dollar has been on an upward trend since the Shahbaz Shareef government took over, having gained 72.07 rupees. In the last nine months of the current government, the rupee has depreciated by 28%, with a monthly decline of 3.2% or around Rs8 per month.
In FYTD, PKR lost 50.58 rupees or 19.80%, while it plummeted by 10.29% against the USD in the last seven sessions, as per data compiled by Mettis Global.
This is in stark contrast to the Imran Khan government where the dollar only gained by Rs58.88, starting from Rs124.05 and ending at Rs182.93, with a monthly gain of only 0.7% or Rs1.34 per USD.
However, despite the dire situation, sources indicate that there are no sellers of dollars in the market, with more people inclined towards dollar buying.
The market-based exchange rate with no direct or indirect intervention was one of the main requirements to complete the ninth review of the International Monetary Fund (IMF) program to unlock $1.2 billion.
This presents an attractive scenario for investors at the Pakistan Stock Exchange (PSX) who are hopeful of upcoming inflows.
It is important to note that following Tuesday's announcement by the Exchange Companies (ECs) regarding the removal of the dollar cap in the open market, the dollar in yesterday's open market was reportedly traded at PKR 252.50 per USD during the initial trading hours. However, within an hour, the greenback depreciated to PKR 243 per USD, down by 4%, raising suspicions of undue intervention from authorities.
Speaking to Mettis Global, Malik Bostan, President of the Forex Association of Pakistan, said that the drastic appreciation and depreciation within an hour was only due to speculative elements and that the rates will be determined purely by the demand and supply available in the market.
Experts are of the view that the decision to cap the dollar rate at the open market in Pakistan has had unforeseen consequences. The cap has created a black or gray market for dollars, as individuals and businesses look for ways to access the currency at a more favorable rate.
The capping of the dollar is seen as a hint of a weakening economy and an increased risk of default.
As the rupee continues to slide down the slippery slope, many are left wondering if there's a light at the end of the tunnel.
The situation has left many feeling like they're between a rock and a hard place, as they struggle to make ends meet in the face of rising prices. The falling rupee has made it increasingly difficult for businesses to stay afloat and for individuals to make ends meet.
Meanwhile, the currency lost 32.4 rupees to the Pound Sterling as the day's closing quote stood at PKR 316.61 per GBP, while the previous session closed at PKR 284.2 per GBP.
Similarly, PKR's value weakened by 27.6 rupees against EUR which closed at PKR 278.84 at the interbank today.
On another note, within the money market, the overnight repo rate towards the close of the session was 17.50%/17.75%, whereas the 1-week rate was 16.65%/16.75%.
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Posted on: 2023-01-26T17:42:57+05:00