The US dollar continued its rising streak against the rupee on Tuesday, rising past Rs199 in interbank trading and marking the completion of a week of breaking records, largely on account of the country's rising imports and depleting foreign reserves.

According to the Forex Association of Pakistan (FAP), the greenback gained Rs2.75 from the previous day's close of Rs196.50 and climbed to Rs199.25 around 1:30pm before closing at Rs199, a gain of Rs2.50.

In the open market, the US currency was being traded at Rs200.50 around 4pm.

The current spell of the dollar's persistent rise against the rupee began on Tuesday last week, when the international currency hit a record high of Rs188.66. It then soared to Rs190.90 on Wednesday, rose past Rs192 on Thursday, reached Rs193.10 on Friday, climbed over Rs194 on Monday and surged past Rs196 yesterday (Tuesday).

While the FAP data showed that the greenback closed Rs196.50 on Tuesday, a Dawn report cited the State Bank of Pakistan's closing rate at Rs195.74 — a figure that signified that US currency was closing in on the psychological barrier of Rs200.

Another Dawn report highlighted on Tuesday that while the dollar kept the rupee in its strong clutch during the entire fiscal year FY22, the last two months proved the worst.

Asad Rizvi, former treasury head-chase of Manhattan Bank, told Mettis Global on Tuesday that "even persistent inflow of record remittances is not helping" in containing the dollar's flight.

"Depleting forex reserves, inflow delay and quieter State Bank of Pakistan are giving jitters to the market. But surging oil prices beyond $110 is disastrous," the Mettis Global report quoted him as saying.

Who will be affected by greenback's flight?

With the dollar rising to uncharted heights, stakeholders warn that a weakening rupee could open up Pakistanis to a second round of inflationary impact, which will hit the lower and middle classes the hardest.

Experts believe that while no sector of the economy would be immune to the fallout from the rupee’s steep devaluation, key areas such as debt servicing and imports for industry and food items will be among the first to be affected.

Topline Securities CEO Mohammad Sohail told Dawn on Tuesday that the common man is always indirectly affected by the fall of the rupee.

"A weaker rupee means costlier imports that increase inflation, which affect the lower and lower-middle class more than the upper-middle class or the very rich," he said.

In addition, an appreciated dollar raises costs of production, which will have an adverse impact on the competitiveness of the country’s products in the international market.

According to Lucky Motor Corporation Limited Chief Executive Officer Asif Rizvi, an increase in the dollar's value will also lead to a rise in the prices of vehicles and hence, car sales would be severely affected in the future.

Car sales numbers had been showing impressive growth, but "new bookings are facing a sharp decline after the huge hike in interest rates and rising vehicle prices," he said, adding that auto financing may reach zero in the coming months.

Meanwhile, Association of Builders and Developers Chairman Mohsin Sheikhani said the massive fall in the value of the rupee had sent prices of construction materials soaring to an alarming level, hiking up the construction cost of an apartment to Rs 5,500-6,000 per sq ft from Rs 3,000 some three years ago.

Reason for dollar's rise

According to currency dealers, the dollar demand never comes down, which did not allow the local currency to stay at any point.

They say the higher demand for dollars is the key reason for the bullish trend in the currency market. Political foot-dragging by the incumbent government on the reversal of fuel and electricity subsidies — a prerequisite for the resumption of the loan programme by the International Monetary Fund (IMF) — has further eroded the confidence of stakeholders.

Meanwhile, the decline in the rupee is also fuelled by an uncontrolled increase in imports coupled with a relatively slower pace of growth in exports.

The rising oil prices have already doubled the oil import bills, but the overall imports are also at a record high. In April, imports increased by 72pc, leaving no room for the government to improve its external balance.

Moreover, foreign exchange reserves of the central bank have touched $10.3 billion, lowest since June 2020.

Currency dealers say the unexpectedly high imports bill and low foreign investment were not in support of the exchange rate while over $13bn current account deficit was already there as a challenge for the government.

According to FAP Chairperson Malik Bostan, another reason for the persistent increase in the value of dollar is its overselling.

"Commercial banks are constantly overselling the dollar in the interbank market, which is why it has been appreciating by Rs1-2 every day," he said while speaking to

Measures to arrest rupee's fall

Given the situation, Prime Minister Shehbaz has directed policymakers to devise a comprehensive strategy in consultation with the stakeholders to halt the rupee's free-fall and improve reserves.

He has also held meetings with Bostan on that matter, and referring to a meeting on Tuesday, the FAP chairperson told that he had asked the PM to take action against commercial banks in order to put an end to the persistent rise in the value of dollar.

Bostan added that he had also advised the premier that an immediate ban should be placed on the dollar's forward trading and 100pc cash margin on all imports.

Imposing the cash margin, he explained, would lead to a decline in imports and would subsequently reduce pressure on the rupee.

Meanwhile, FAP secretary general Zafar Paracha said the rupee had chances of a rapid recovery if there were "good results" of talks with the IMF in Doha and the international moneylender released a $1 billion tranche, which has been delayed in the aftermath of the stalling of the IMF's programme with Pakistan in April.

Otherwise, he added, the dollar could even breach the Rs200 mark.

Aiming to put an end to the rupee's free fall, the government has held multiple meetings on the matter over the past week and a Dawn report said on Tuesday that this reflected the growing frustration in the power corridors of Islamabad.

More to follow

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