The US dollar continued to hit new heights against a weakening Pakistani rupee, and reached the 315 level during trading as gap with the inter-bank rate widened further.
The gap between rates in the inter-bank and open markets is required to be less than 1.25% under one of the structural benchmarks set by the International Monetary Fund (IMF).
However, the gap – called the premium by the IMF in its country report on Pakistan published after the Stand-By Arrangement’s approval by the Executive Board – has been widening over the past few weeks.
On Wednesday, dealers Business Recorder reached out to said the rupee was being quoted at 315 for selling and 312 for buying purposes for customers in the open-market, in comparison to 303-306 recorded in the previous session. The inter-bank market has currently not crossed 300, according to latest updates.
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On the other hand, data released by the Exchange Companies Association of Pakistan (ECAP), during trading on Wednesday, quoted the rates at 306.50 and 303.50 for buying and selling, respectively. It later published closing rates at 309 and 312.
Currency dealers told Business Recorder that rates have risen owing to depreciation in the inter-bank market, where the US dollar is nearing the psychological 300 level.
“This isn’t a supply-side issue. Its driven by sentiment and some demand,” said a currency dealer.
Despite clinching a last-minute SBA of the International Monetary Fund (IMF) last month, the rupee has come under renewed pressure as imports have risen, after the government decided to lift import curbs, a key IMF condition.
Additionally, lack of further foreign exchange inflows have put pressure on the dollar position in the local market.
“Timely inflows of external support are vital for a stable PKR,” Amreen Soorani, Head of Research at JS Global, told Business Recorder.
The expert warned that a further increase in imports, and outflow of pent-up dividends would add pressure.
Meanwhile the country, which remains engulfed in various economic issues, is currently being governed by a caretaker government that is responsible for steering the country through a national election while grappling with rising political tension as well as record high inflation and interest rates.
Globally, the greenback also strengthened near a two-month peak on Wednesday as investors looked to the Federal Reserve chair’s speech this week for cues on the path of monetary policy.
The dollar index, which measures the US currency against six rivals, was at 103.55, not far from the two-month high of 103.71 it touched on Tuesday.
The index is up 1.6% in August and is on course to snap its two-month losing streak.