After back-to-back gains in the previous week, Pakistan's rupee suffered a drop against the US dollar, depreciating to 170.74 in the inter-bank market on Monday.
As per the State Bank of Pakistan (SBP), the PKR closed at 170.74 against the USD, a depreciation of 21 paisas or 0.12%. Last week, the PKR dropped to 170.96 against the greenback, the lowest level in its history, before staging a minor recovery.
“Thin trading was witnessed in the market due to Columbus Day holiday in the United States, which leads to volatility,” Samiullah Tariq, head of research and development at Pakistan Kuwait Investment Company, told Business Recorder.
The rupee has been under pressure since May this year as a widening current account deficit and high import figures take toll on the country's currency. In August 21, the current account posted a deficit of $1,476 million, compared to a deficit of $814 million in July, as the import bill ballooned to over $6 billion.
In order to arrest the rupee decline, the SBP has introduced various measures including amendments in instructions for Exchange Companies to enhance transparency in foreign currency transactions and to curb the undesirable outflow of dollars.
The central bank has also imposed 100% Cash Margin Requirements (CMR) on import of 114 items, taking the total number to 525. Furthermore, it also revised Prudential Regulations (PR) for consumer financing to moderate demand growth in the economy.
The string of measures has led to a reduction in trading activity in the open market, as buyers are purchasing dollars using banking channels, said Malik Bostan, President Forex Association of Pakistan.
He also urged the government to take measures to narrow the demand and supply gap.
On the other hand, the government has also intensified its crackdown against dollar hoarders, with Interior Minister Sheikh Rashid announcing on Monday that 88 people were arrested across the country.
The minister added that the government has also decided to conduct an audit of five exchange companies.
Inter-bank market rates for dollar on Monday
BID Rs 170.60
OFFER Rs 170.70
In the open market, the PKR gained 20 paisas for buying while remaining unchanged for selling against USD, closing at 170.50 and 171, respectively.
Against Euro, the PKR remained unchanged for buying while gaining 50 paisas for selling, closing at 196.50 and 198, respectively.
Against UAE Dirham, the PKR gained 20 paisas for both buying and selling, closing at 47.40 and 47.70, respectively.
Against Saudi Riyal, the PKR remained unchanged for both buying and selling, closing at 45.20 and 45.40, respectively.
Open-market rates for dollar on Monday
BID Rs 170.50
OFFER Rs 171