The rupee’s slide against the dollar continued unabated on Thursday, with the local currency falling to Rs226 in the interbank market, with watchers attributing the losses to political “chaos” and a greenback that is strengthening against other currencies as well.

The rupee had closed at Rs224.92 on Wednesday.

When the session opened today, the local currency depreciated Rs2.08 to 227 against the greenback by 10:57am, according to the Foreign Exchange Association of Pakistan (FAP).

However, the rupee made a nominal recovery to close at Rs226.81, depreciating 0.83pc from Wednesday’s close.

‘Political chaos’

FAP Chairperson Malik Bostan attributed the rupee’s consistent decline in the last five sessions to “political chaos” and the rise in the dollar’s value in the international market.

The political chaos in the country had dampened investors’ confidence, because of which importers were worried and “unnecessarily” buying dollars from the market, he told Dawn.com. The demand for dollars was rising in the interbank market as a result, he said.

In addition, the dollar’s value had risen against over 40 currencies, including the British pound and Japanese yen over the last week, which had affected the rupee in the local market, Bostan explained.

He asked the State Bank of Pakistan (SBP) to take strict action against banks involved in “speculation” so the “artificial increase” in the dollar’s price could be stopped. The FAP chairperson also asked the government to negotiate with the International Monetary Fund (IMF) for the early release of the tranche so investors’ confidence could be restored.

Calls on Miftah to bring stakeholders in loop

Meanwhile, Abdullah Zaki, importer and former president of the Karachi Chamber of Commerce and Industry, blamed “panic buying” and demanded of the finance minister to “immediately discuss with stakeholders the conditions regarding the rupee’s value agreed with the IMF”.

Both importers and exporters were worried because of the shortage of dollars in the market, he said. “Rumours are circulating in the market about taking the rupee’s value to 240 which is creating panic.

“The finance minister should reject these rumours so the uncertain condition in the market is ended.”

‘Panic to subside in a few days’

Finance Minister Miftah Ismail has also blamed political turmoil for the rupee’s fall.

“The panic in the market is primarily due to political turmoil, which will subside in a few days,” Ismail told Reuters a day earlier, adding that he expected pressure on the rupee to fall in the next few days.

KCCI demands immediate action

Separately, a meeting of the Karachi Chamber of Commerce and Industry (KCCI) demanded that the government take emergency steps to arrest the rupee’s fall.

The body called on the government to immediately appoint a permanent governor for the SBP, with the KCCI president demanding the central bank’s intervention.

Businessmen Group (BMG) chairman Zubair Motiwala said the rupee had fallen because of “political uncertainty” and called for the distancing of political matters from the economy.

“Economic matters are being mishandled,” he claimed.

Businessman Aqeel Karim Dhedhi demanded that the government fix the rupee’s price at 191 for two weeks.

Consistent decline

The rupee appreciated to 204.56 in the first week of July after touching 211.93 on June 22. It kept losing its value against the dollar but registered a minor appreciation when the country reached its staff-level agreement with the IMF on July 15.

It has continued to fall in every session since then.

The SBP attributed to the “market-determined exchange rate system” under which the current account position, news stories and domestic uncertainty contribute to the daily currency fluctuations.

In an apparent attempt to downplay the depreciation, the SBP said a “better measure” of the rupee’s strength is the real effective exchange rate, which takes into account the currencies in which Pakistan trades in inflation-adjusted terms.