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PKR in freefall: Currency plummets by 50 paisa per USD

PKR in freefall: Currency plummets by 50 paisa per USD
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January 25, 2023 (MLN): The Pakistani Rupee (PKR) has continued its downward trend, depreciating by 50 paisa amid political upheaval and economic uncertainty. In today's interbank session, the currency settled the trade at PKR 230.89 per USD compared to yesterday's closing of PKR 230.4 per USD.

Within today’s session, the local unit traded in a band of 60 paisa, showing an intraday high bid of 231 and low offer of 230.50 while in the open market, PKR was traded at 240.50/243.50 per USD.

Analyst fraternity and market experts attribute the depreciation of the PKR to the ongoing political turmoil in the country. The recent political upheaval has created a climate of uncertainty and instability, which has led to a decrease in investor confidence.

It is pertinent to mention that following yesterday’s announcement by the Exchange Companies (ECs) regarding the removal of the dollar cap in the open market, the dollar in today’s open market was reportedly traded at PKR 252.50 [10:00 am] per USD during initial trading hours, however, within an hour, the greenback depreciated to PKR 243 per USD down by 4% [11:00 am] in the open market, raising suspicions of undue intervention from authorities.

However, speaking to Mettis Global, Malik Bostan President of the Forex Association of Pakistan said, “The drastic appreciation and depreciation within an hour was only due to speculative elements as we have only removed the cap from dollar rates.”

The rates will be purely determined by the demand and supply available in the market, he added.

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.

Domestically, the depreciation of the PKR has also led to an increase in the cost of living for many Pakistanis, as imported goods become more expensive. This has added to the economic strain on many households, which are already struggling with rising prices and a lack of job opportunities.

In FYTD, PKR lost 26.04 rupees or 11.28%, while it plummeted by 0.86% against the USD in the last seven sessions, as per data compiled by Mettis Global.

Alternatively, the currency gained 1.8 rupees against the Pound Sterling as the day's closing quote stood at PKR 284.2 per GBP, while the previous session closed at PKR 285.95 per GBP.

On the other hand, PKR's value weakened by 27 paisa against EUR which closed at PKR 251.28 at the interbank today.

On another note, within the money market, the overnight repo rate towards the close of the session was 16.5%/17%, whereas the 1-week rate was 16.65%/16.75%.

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Posted on: 2023-01-25T16:48:56+05:00

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