The State Bank of Pakistan (SBP) said on Tuesday that the recent rupee depreciation against the US dollar was "in large part a global phenomenon," adding that in real effective terms, the "depreciation in the rupee value since December 2021 has only been 3%."
"This is a better measure of the strength & competitiveness of a currency than the US$ rate," the SBP said on its Twitter account.
In a series of tweets, SBP said that the recent movement in the rupee value was a feature of a market-determined exchange rate system.
"Under this system, the current account position, relevant news items, and domestic uncertainty together determine daily currency fluctuations," it highlighted.
It further explained that globally, the US dollar has surged by 12% in the last 6 months to a 20-year high, as the "Fed has aggressively raised interest rates in response to rising inflation."
"Like most advanced and emerging market currencies across the world, the Rupee has depreciated against the US$ since Dec 21," it said, adding: "It has depreciated by 18% over this period."
However, the statement noted that when evaluated in real effective terms against a basket of currencies in which Pakistan trades and adjusts for inflation, the depreciation in the rupee since Dec 21 has only been 3%.
"This is a better measure of the strength & competitiveness of a currency than the US$ rate," it said.
The statement comes after Pakistan's rupee took a massive hammering at the hands of the US dollar in the inter-bank market 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.
As per the SBP, the rupee closed with a fall of Rs6.79 or 3.06% to settle at Rs221.99.
This was the highest day-on-day depreciation after June 26, 2019, said a post-market note from brokerage house Arif Habib Limited (AHL).
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.