Rupee steady in the market; trading at 115.61 in inter-bank market

The USD/PKR in the inter-bank market during the last five months has been on an increasing trend.

The Rupee against dollar in the inter-bank market has depreciated by about 10.49 percent in last five months. State Bank of Pakistan in December last year had let go the Rupee to adjust its value in tandem with the market factors. The Rupee, once it was let go off by the SBP, had depreciated by more than five percent reaching at Rs. 110.41 from Rs. 105.5.

Another bout of depreciation came in March this year, when pressures began mounting on the dollar amidst declining exports and expanding imports. Rupee in March again depreciated by another five percent during just seven days. Rupee devalued from 110.59 on 19th March, 2018 to 115.5 on 26th March, 2018.

The prominent reasons for this depreciation of currency were widening of trade deficit, increase in the external debt and sharp decline in foreign exchange reserves.

However, in the open market, dollar is trading at 117.90; a change of 9.21 percent in value of dollar was seen during last six months. During the final week of April, 2018 it traded over 119.

Other reason for the sharp incline in the Rupee/Dollar parity was the shortage of dollars in open market and it was reported in the press that expectations of dollar are likely to go up if SBP fails to inject more dollars in the market.

It is to be noted that the prevalent gap between interbank and open market rates is widening with every bout of devaluation. Furthermore, this does not bode well for the Rupee as more the gap between the rates the probability of further devaluation increases.