In today’s trading, the Pakistani rupee found some stability against the US Dollar, opening at 304 in the interbank market.
Midday Decline and Recovery
Around noon, the rupee faced downward pressure, dropping to as low as 307.925, shedding around Rs. 4 against the greenback. This decline was in line with the opening bell’s bearish sentiment. However, between 1:30 PM and 2:30 PM, the currency managed to recover slightly, steadying around the 305 level for the remainder of the day.
Long-Term USD Gains
Since the installation of the caretaker government, the US Dollar has appreciated by Rs. 16.02 against the PKR.
Open Market Rates
Open market rates, recorded across multiple currency counters, remained within the range of 308-314.
Closing Appreciation and Black Market Rate
By the day’s close, the PKR exhibited a modest appreciation of 0.02 percent, ending at 305.47, gaining seven paisas against the dollar. In contrast, the black market exchange rate moved further away from the official bank rate, trading in the 325-331 band. Currency dealers anticipate a slowdown in the depreciation until the PKR reaches a more comfortable level, possibly not until September. September might witness record lows, potentially between 310-320, following the downward trend seen in August, unless macroeconomic conditions improve.
The Pakistani Rupee has depreciated by nearly Rs. 85 since January 2023 and over Rs. 132 against the US Dollar since April 2022.
Factors Behind Depreciation
The rapid decline in the value of the Pakistani Rupee in 2023 can be attributed to a combination of factors, including premature relaxation of import controls, declining exports, and the diversion of home remittances to the hawala system. This has led to an increased demand for US dollars by smugglers and informal/under-invoiced traders.
Challenges for Pakistan’s Economy
The Pakistan Business Council has termed this exchange rate plunge as a significant challenge for Pakistan’s economy.
State Bank of Pakistan’s Reserves and Hawala’s Popularity
Gradual withdrawals from the State Bank of Pakistan (SBP) reserves each week indicate the declining level of documented dollar volume held by the state. The popularity of hawala has tempted both buyers and sellers to exchange/transfer their funds for higher gains. The black market rate, which reached above 330 at its peak on Friday, illustrates the widening gap between the official and free market rates, contradicting the regulator’s efforts to align the rupee/dollar rate across all channels.
Interbank Market Currency Performance
In the interbank market today, the PKR showed strength against most other major currencies. It gained one paisa against the Australian Dollar (AUD), one paisa against the Saudi Riyal (SAR), two paisas against the UAE Dirham (AED), 54 paisas against the British Pound (GBP), and Rs. 1.17 against the Euro (EUR). Conversely, it lost 60 paisas against the Canadian Dollar (CAD) in today’s interbank currency market.