The rupee maintained its downward trajectory against the United States dollar on Thursday as it fell by another 70 paisas to Rs159.30 during the intraday trade in the kerb market.
This represents an increase of 0.44 per cent in the greenback from its value of Rs158.60 at the beginning of the day.
The open market also noticed a similar trend as the dollar gained 50 paisas to reach Rs158.50 as of 11:36am.
For the good part of the past six months, the exchange rate had held steady but since Monday, the dollar has risen by a significant Rs5.05 from Rs154.25, which translates into a 3.27pc rise.
Currency dealers attribute this to foreign selling at the Pakistan Stock Exchange, which clocked in at $16.7 million last week but has been slowing down for the past few days.
They regard this phenomenon to be a temporary one, triggered by the sudden demand created by international investors unloading their positions.
This includes debt markets as foreign inflows in the government market treasury bills have crossed the $3 billion mark. But with their maturity due in less than a week, many are rushing to liquidate their holdings instead of reinvesting, largely due to the panic caused by the coronavirus outbreak.
In addition, expectations of a rate cut by the State Bank of Pakistan in the upcoming monetary policy statement have contributed to foreigners shying away from reinvestment in T-bills.
Dollar skids against other currencies
Meanwhile, the dollar slid in another seismic shift to price in more US interest rate cuts as President Donald Trump sapped market confidence with a coronavirus plan light on details. Trump's plan came with markets already in turmoil amid a string of increasingly dire news on the coronavirus.
The greenback dropped as far as 1pc to 103.32 yen, fell as much as 0.6pc to $1.1333 against the euro and lost 0.6pc to the safe-haven Swiss franc.
Riskier currencies were punished as the fearful mood sent the Australian dollar down 0.6pc and the South Korean won skidding 1pc, and losing even more, ground to the rising yen.
“The market was looking for more,” said Moh Siong Sim, currency strategist at the Bank of Singapore.“A travel ban is part of the solution, but the more important parts are still missing. They are really the public health measures: Paid sick leave, free testing, free treatment.”
Futures markets reacted swiftly. They are now pricing in the US Federal Reserve moving the lower end of its benchmark funding band to zero when it meets next week.
“The deflationary shock that we had assumed would trigger a US entry into the zero-yield world is turning out to be a combo of trade war, oil price war and COVID-19 virus,” JP Morgan's long-term strategists Jan Loeys and Shiny Kundu said in a note.
“[There are] close to even odds now of an official US recession this year,” their note added.