The dollar rose to Rs202 in the interbank market on Tuesday, with analysts attributing the rupee's decline primarily to oil-related payments and uncertainty surrounding the resumption of the International Monetary Fund's (IMF) loan facility.
During interbank trade, the rupee fell sharply to hit an all-time low of 203.45 against the dollar from the previous day's close of 200.40. However, the local currency made a slight recovery to finally settle at 202 by the day's end.
(The FAP's closing rate of the previous session is slightly higher than the official rate of Rs200.06 released by the State Bank of Pakistan).
In the open market, the dollar was trading at Rs204 around 12:15pm.
Saad Bin Naseer, director of Mettis Global — a web-based financial data and analytics portal, explained this yet "another dip" in the rupee's value after it weakened against the dollar by more than Rs2 on Monday as a consequence of the currency market being roiled by "decline in [foreign exchange] reserves and oil-related payments".
Moreover, he said, the rupee was also under pressure in view of the upcoming Financial Action Task Force meeting next week.
"All of these factors combined with the uncertainty surrounding the resumption of the International Monetary Fund programme and China’s refinancing of $2.3bn have pushed the rupee to a new low," Naseer told Dawn.com.
Malik Bostan, who heads the FAP, said that the rupee would remain under pressure till June 30, saying that inflation was expected to rise due to the delay in the resumption of the IMF's $6 billion programme with Pakistan and fuel, gas and electricity price hikes. This, he added, would lead to an increase in the interest rate, as a result of which the rupee would weaken.
Bostan also linked the rupee's decline to the strengthening of the dollar in the international market.
This upward drive of the dollar was likely to persist in the coming days, he said.
Komal Mansoor, head of research at Tresmark, attributed to rupees decline to a dearth of dollar inflows in the market.
"There are outflows in the market and very few dollars. [The] SBP is also not supplying any liquidity. Swap premiums have also dropped drastically because banks are generating dollars by doing buy-now-sell-forward swaps," she said. "With sentiment significantly negative and no fresh inflows in the pipeline, [the] rupee is set to depreciate further".
The latest episode of the rupee's slide against the dollar began on June, with the greenback snapping the local currency's five-day winning streak.
According to data released by the State Bank of Pakistan, the rupee had started gaining against the US dollar on May 27 and kept appreciating for five consecutive sessions. This was after the greenback's persistent rise on account of the country's swelling imports, declining foreign exchange reserves and uncertainty surrounding the IMF's $6 billion facility, which has been stalled since April.
On May 19, the dollar had reached a high of Rs200 for the first time, and respite for the rupee had come only after the government had increased the petroleum prices by a whopping Rs30 a litre, paving the way for the release of a $1 billion tranche from the International Monetary Fund. Subsequently, the greenback had lost Rs2.25 in a single session to fall to Rs199.76 on May 27.
The dollar's recovery on June 3, after consistently losing ground against the rupee for five days, was termed temporary by currency dealers, who attributed it to oil price shocks that would increase inflation.
They told Dawn that they were expecting inflows from the IMF and China would once again support the local currency.
Finance Minister Miftah Ismail has expressed hope for an IMF deal and rollover of a $2.3 billion Chinese loan that would improve the foreign exchange reserves of the country.
