- Falls Rs6.79 or 3.06% in inter-bank market on Tuesday
Pakistan's rupee closed at a record low of 221.99 against the US dollar on Tuesday, going as low as 224 during intra-day trading amid renewed political uncertainty that wrecked market confidence and also gave "speculators" additional fodder.
The rupee took a massive hammering throughout the trading session, and traded at 224 at one point before recovering slightly to end with a depreciation of 3.06%.
As per the State Bank of Pakistan (SBP), the rupee closed with a fall of Rs6.79 or 3.06% to settle at Rs221.99.
This is the highest day-on-day depreciation after June 26, 2019, said a post-market note from brokerage house Arif Habib Limited (AHL).
On Monday, the rupee had closed at the then-record low of 215.2 after depreciating nearly 2% against the US dollar in the inter-bank market as political uncertainty after Punjab by-polls threw the market into a frenzy.
On Tuesday, reports indicated heavy import payments and renewed political uncertainty were reasons behind the massive fall. Additionally, Fitch Ratings' downgrade of Pakistan's outlook only added to the pressure.
Analysts said calls for general elections have gained momentum after Pakistan Tehreek-e-Insaf's (PTI) victory in the elections held on Sunday, putting economic reforms on the back seat again.
“The political storm in the making has disturbed policy continuity,” Wajid Rizvi, Head of Research at Intermarket Securities, told Business Recorder.
“This has led to speculative behaviour regarding the International Monetary Fund (IMF) programme,” he said.
Compounding uncertainty is the downgrade of Pakistan’s outlook by Moody’s last month and Fitch today, said Rizvi.
Fitch Ratings agency on Tuesday downgraded Pakistan’s outlook from stable to negative in view of the significant deterioration in the country's external liquidity position and financing conditions since early 2022.
Fitch saw considerable risks to the implementation of the IMF programme and to continued access of Pakistan to financing after the programme's expiry in June 2023 in a tough economic and political climate.
“Despite the recovery in remittances, things are not looking good with regards to the political climate,” said Rizvi. “Considering elections could be around the corner, the government is more likely to pursue popular measures, while fiscal consolidation would not be given preference,” he said.
Meanwhile, Samiullah Tariq, Head of Research at Pakistan Kuwait Investment Company, added that the payment pressure amid oil imports and ongoing political uncertainty caused the rupee's decline.
Inter-bank market rates for dollar on Tuesday
BID Rs 223
OFFER Rs 224
In the open market, the PKR lost 8 rupees for both buying and selling against USD, closing at 222 and 224, respectively.
Against Euro, the PKR lost 4 rupees for both buying and selling, closing at 220 and 222, respectively.
Against UAE Dirham, the PKR lost 2.20 rupees for both buying and selling, closing at 60 and 60.50, respectively.
Against Saudi Riyal, the PKR lost 2 rupees for both buying and selling, closing at 58 and 58.50, respectively.
Open-market rates for dollar on Tuesday
BID Rs 222
OFFER Rs 224