Pakistan's rupee continued to sustain losses against the US dollar for the third successive session, settling with a depreciation of 0.7% on Tuesday.
As per the State Bank of Pakistan (SBP), the rupee closed at 221.42 after declining by Rs1.56 against the greenback.
On Monday, the rupee had settled at 219.86 after declining by Re0.88 against the greenback.
Meanwhile, the spread between inter-bank and open-market rates soared to what currency dealers said was a historic high with the gap hitting Rs10-12 on Monday. The US dollar finished at 219.86 in the inter-bank market, but was trading at the 230-232 level in the open market. On Tuesday, the gap widened further.
Currency dealers attributed the widening spread to a lack of availability of dollars in the open market following the suspension of duties and taxes on import of vegetables and an increase in smuggling.
Meanwhile, Saad Khan, Head of Equities at IGI Securities, attributed the recent rupee depreciation to greenback’s rising global demand.
“Internationally, the US dollar is at a two-decade high, and September interest rate outlook suggests an aggressive interest rate hike,” Khan told Business Recorder on Tuesday.
“This global appreciation is being reflected locally, however, this factor would reverse in coming months."
Khan added that the government has also allowed duty-free imports of food items as it looks to ensure food security, but this has created pressure on the rupee.
On the increasing spread between inter-bank and open-market rates, Khan said that the demand for dollars in the private sector is driving the demand for US dollar in the open-market.
“However, the wider spread is a temporary factor and would reduce in the coming days."
Globally, the US dollar took a breather on Tuesday after a sweeping rally, easing slightly from milestone highs on the euro, yen and sterling, but not too far as recession stalks Europe, and U.S. interest rates are poised for sharp rises.
The dollar index fell 0.06% to 109.53 after rising as high as 110.27 on Monday.
Meanwhile, oil prices, a key determinant of currency parity, steadied on Tuesday after a two-day rally as OPEC+’s decision to cut output in October was balanced by concern about a weak economic outlook and the prospect of more interest rate hikes.
Inter-bank market rates for dollar on Tuesday
BID Rs 221.70
OFFER Rs 222
Open-market movement
In the open market, the PKR lost one rupee for both buying and selling against USD, closing at 231 and 233, respectively.
Against Euro, the PKR lost 2 rupees for both buying and selling, closing at 230 and 232 respectively.
Against UAE Dirham, the PKR remained unchanged for both buying and selling, closing at 64 and 64.50, respectively.
Against Saudi Riyal, the PKR lost 20 paisas for both buying and selling, closing at 61.50 and 62, respectively.
Open-market rates for dollar on Tuesday
BID Rs 231
OFFER Rs 233