KARACHI: Rupee fell to a record low against the dollar on Monday. It sharply depreciated by 80 paisa within a week and experts are expecting more depreciation in the next few days.Analysts pointed towards a strange relationship between the rupee and the greenback. Demand for the US currency increases in the local currency market when bilateral relations between Pakistan and US sour.
The US dollar was traded at Rs88.03-04 in the inter-bank market on Monday, making it a record high rate.
“In the last session, we traded dollar at Rs87.95 and it was expected that the market may see more jump in the beginning of the new week,” said Atif Ahmed, a currency dealer in the inter-bank market. He said that the dollar rate went as high as Rs88.07, but no deal was executed at this rate, and most of the deals remained in the range of R88.02-04.
Within a week, the US dollar gained 80 paisa which shows declining strength of the local currency, and also the high demand of the greenback.
“The State Bank did not intervene during this week and no support was given to the local currency which ultimately lost against the dollar,” said Atif.
The State Bank has been a regular supporter of the local currency as it used to pump dollars in the market.
Had the SBP not intervened in the currency market, the dollar could have gained more on Monday, currency dealers said.
They said that a sudden increase of dollar demand by the importers and a sluggish inflow created a gap, resulting in higher rates for the greenback.
However, open market dealers said that the dollar was surplus in the market and as such they were surrendering 80 per cent of their dollar holdings to banks.
The rate of dollar in the open market was almost the same as in the inter-bank market.
“The inflow is high and we are surrendering 80 per cent of dollars we purchased from sellers,” said Malik Bostan, President, Exchange Companies Association of Pakistan.
He said that no individual is involved in dollar buying from the market, instead the exchange companies are the net purchasers of the greenback.
Analysts said that the falling foreign exchange reserves and possible difficulties in repayment of the IMF loans worth $8.9 billion have weakened the exchange rate.
They said that fear of loss against the US dollar has been on rise for more than a month as local currency has lost Rs2 per dollar in just one month. It was a sharp depreciation, they said.
They also identified a strange relationship between depreciation of Pakistan rupee and Pakistan-US relations. Whenever an incident hits relations, it also influences the local currency.
They said that the latest incident of killing of 26 armymen by Nato forces would continue to keep pressure on exchange rate.