KARACHI: The Pakistani rupee has been under immense pressure in recent times with a widening current account deficit along with falling exports making the case stronger for depreciation in the currency.
The market was again caught off guard on Monday after the interbank rate of the US dollar touched Rs110, dealing yet another blow to the rupee within a week.
The US dollar saw an increase of Rs3 in the morning, climbing to Rs110 in the interbank market as volatility persisted.
On Friday, the US dollar had increased by Rs4.5 in the interbank market and Rs1.5 in the open market, catching the market by surprise, especially since the State Bank had announced on Thursday that it had received $2.5 billion earned from the recent issuance of euro and sukuk bonds.
Pakistan recently raised $1 billion in a five-year Sukuk and $1.5 billion in ten-year Eurobond transactions.
Normally when supply increases, like it did last week, the market stabilises as the balance of payments increases.
However, analysts said that the current account deficit and related factors were building pressure on the economy which resulted in the deteriorate in the rupee against the dollar.
Economist Muzammil Aslam told Geo News earlier that an increase in the dollar rate leads to a rise in prices of food items, petrol and services.
He said that a positive aspect of the increase in the dollar rate is that the country’s exports, which have dipped in the past several years, can increase along with the country’s industrial output.
Aslam added that the recent climb of the dollar could also be a result of the delayed devaluation of the Pakistani rupee, which has been delayed for over a year.