Pakistan's rupee fell for the third successive day, depreciating further to close at yet another record low against the US dollar in the inter-bank market on Wednesday.
As per the State Bank of Pakistan (SBP), the PKR closed at 171.13 against the USD, a day-on-day depreciation of nine paisas or 0.05%. On Tuesday, the PKR had crossed the 171 mark for the first time.
Pakistan’s rupee has depreciated over 11% since its recent high in May this year. Its weakness has been driven by a widening current account deficit, which increased to $1.48 billion in August 21, a massive 81% month-on-month increase from $0.814 billion.
While remittance inflows have shown momentum, hitting $2.7 billion in September, high imports as well as the Afghanistan situation have added to pressure on the currency.
“With imports continuing to rise sharply, the PKR is likely to stay on the backfoot until current account pressures are brought under control,” said Tellimer Securities in its latest report.
“Whereas BOP imbalances, manifested in falling reserves in recent years, Pakistan’s transition to a more flexible currency means that PKR weakness is the inevitable upshot of increasing current account imbalances, especially if financial flows moderate or reverse course (which is a risk, given the increased reliance on relatively fickle portfolio and other investment inflows),” it added.
Meanwhile, experts also suggest that the outflow of dollars due to pending Eurobond repayments would add pressure as well.
“Market will be keenly watching the reaction after the Eurobond repayment, as outflow will hit foreign exchange reserves that could add pressure on PKR,” said Asad Rizvi, ex-treasury head at Chase Manhattan Bank, in a tweet.
Rizvi said that the news of 1-bn euro aid to Afghanistan could indirectly ease the burden, “but more clarity is needed".
At home, the SBP has introduced a number of measures to moderate demand, while the government has also ramped up its efforts to arrest the illegal outflow of dollars to Afghanistan.
In a recent development, the Federal Investigation Agency (FIA) claimed that it has traced those individuals who recently bought the greenback from foreign exchange companies amounting to $63 million.
Inter-bank market rates for dollar on Wednesday
BID Rs 171.10
OFFER Rs 171.20
In the open market, the PKR lost 30 paisas for both buying and selling against USD, closing at 171.30 and 171.90, respectively.
Against Euro, the PKR lost 50 paisas for buying while remaining unchanged for selling, closing at 197 and 198, respectively.
Against UAE Dirham, the PKR lost 20 paisas for buying and 10 paisas for selling, closing at 47.90 and 48.10, respectively.
Against Saudi Riyal, the PKR lost 10 paisas for both buying and selling, closing at 45.40 and 45.60, respectively.
Open-market rates for dollar on Wednesday
BID Rs 171.30
OFFER Rs 171.90