After witnessing a few days of relative calm, the currency market again experienced volatility with the dollar gaining 90 paisas to finally close at Rs167.9 in the interbank market on Tuesday.
This represented a 0.545 per cent increase over the greenback’s opening rate of Rs167.
Meanwhile, rates provided by the Exchange Companies Association of Pakistan showed a steeper climb as the dollar rose to Rs168.5, up from Monday’s closing of Rs167.2 — a gain of Rs1.3 overnight.
Currency dealers did not pinpoint to anything particular that prompted the movement in the exchange rate on Tuesday. “Nothing new as such happened, and it is more of a continuation of the events of the past one month or so,” former general secretary of ECAP Zafar Paracha said.
The rupee’s downward slide began nearly a month ago on March 9 — after holding steady for almost half a year — when the greenback sharply rose by Rs3.65 in the interbank. Since then, the dollar has gained 8.88pc or Rs13.7 over its March 6 rate of Rs154.2.
Much of the appreciation in the dollar is attributed to increased demand by foreigners as panic caused by the coronavirus has pushed them to seek the safety of safe-haven assets and redeem positions from others.
The past one month has seen heavy foreign selling in the equity market, along with around $2 billion of outflow from the market treasury bills — which was further hastened after the State Bank of Pakistan cut its key interest rate by a cumulative 2.25pc to 11pc over two rounds of monetary policy committee meetings.
On Monday alone (the last available data), foreigners divested $73.3 million from market treasury bills.
The increased demand for the greenback has already put pressure on the SBP’s foreign exchange reserves which have been consistently falling from the week ending on March 6 ($12.79b) to reach $11.186b as of March 27.