The value of the dollar reached an all-time high against the rupee on Tuesday, reaching Rs168.9 in the interbank market.

According to an update posted at 11:39am on Mettis Global, a web-based financial data and analytics portal, the rupee slipped by 80 paisa against the dollar on Tuesday morning, continuing its losing streak against the greenback.

The update said the dollar was being traded at Rs168.9 at 11:41 am, compared to the previous day's close of Rs168.09. It was recorded at 168.9 at the day's closing as well.

Meanwhile, the greenback appreciated 70 paisa against the rupee in the open market and was being traded at Rs169.7.

The highest value of the dollar against the rupee was last recorded at Rs168.43 on August 26 last year.

The dollar had hit a 13-month high on September 10, 2021, when it reached close to the record high and was traded at Rs168.02.

Since May this year, the dollar has been rapidly marching towards its peak value attained in August 2020 after foreign investments, including hot money invested in domestic bonds, started flying back to their destinations amid the pandemic impact, which began from the middle of March 2020.

However, the current situation is different from the previous episodes of increase in the dollar's value because the foreign exchange reserves of the country are at their peak. The rising import bill played a key role. However, the fear of higher current account deficit in FY22 is also a strong force convincing the buyers to book more dollars for future imports.

The widening trade gap is creating fear among importers that the exchange rate would further support the greenback against the local currency.

According to Zafar Paracha, secretary general of the Exchange Companies Association of Pakistan, the value of the dollar has been rising because of an increase in the purchase of the currency by importers and the smuggling of the greenback to Afghanistan.

He said it was after years that a black market of the dollar had emerged where the currency was being traded at a rate Rs3 to Rs5 higher than that in the open market.

Paracha added that the smuggling of the dollar and its illegal trade needed to be curtailed to control its rising value.

Faisal Mamsa of Tresmark, a terminal that tracks the global currency market, said traders were testing the State Bank of Pakistan's (SBP) intent all day by trading just a few paisas below Rs169. He urged for an intervention by the central bank, citing "abnormal volatility in spite of increased reserves".

"[A] weaker currency will give way to higher inflation which will then require a tighter monetary policy and hike in interest rates, adversely affecting GDP growth," he added.

For its part, the SBP remains silent over the recent steep fall of the local currency.

SBP Governor Dr Reza Baqir, during the presentation of monetary policy last month, made it clear that the current account deficit would be higher than FY21.

He had said the deficit would be in the range of two to three per cent and the exchange rate would respond to this deficit in the form of appreciation of the dollar. He had also not identified the limit of devaluation of local currency or the point of stability of exchange rate.