The PKR remained under pressure on Monday, depreciating by Rs1.26 against the dollar in the interbank market.

Data shared by the State Bank of Pakistan showed the local currency closed at Rs221.92 per dollar, down 0.57 per cent.

Mettis Global Director Saad bin Naseer said the primary reasons for the rupee’s fall were the dollar’s ascent in international markets and the country’s flood situation.

People believed that the destruction of crops would lead to a higher current account deficit since Pakistan would have to import wheat, he added.

The United States dollar surged to a 20-year high against a basket of currencies today after Federal Reserve Chair Jerome Powell signalled interest rates would be kept higher for longer to bring down soaring inflation.

Naseer said another reason for the rupee’s decline was the letter written by Khyber Pakhtunkhwa Finance Minister Taimur Khan Jhagra to Federal Finance Minister Miftah Ismail in which he conveyed his administration’s inability to provide a provincial surplus this year, a key requirement previously agreed upon for the revival of the International Monetary Fund (IMF) programme.

“If the IMF’s executive board decides to approve the loan tranche disbursement in today’s meeting, things will ease out. There is not much panic in the market. People are buying dollars cautiously and there is pressure on the rupee,” the Mettis Global director said.

Meanwhile, Exchange Companies Association of Pakistan (Ecap) General Secretary Zafar Paracha said the rupee’s depreciation was contradictory to market expectations.

He also said that the destruction of crops would lead to a higher import bill, and in turn, a higher current account deficit.

“We have not received good news from the IMF yet. The agreements with friendly countries are all linked to the IMF,” he noted, adding that sentiments had soured because of the political tension between the federal and provincial governments in light of Jhagra’s letter.

Paracha also attributed the rupee’s fall to the smuggling of the greenback to Afghanistan, which he said had caused a shortage in the markets.

“Smuggling is at its height and all our currency is going to Afghanistan so exchange companies don’t have dollars and there is a shortage. At the same time, the government’s move of lifting the import ban and imposing heavy regulatory duties has led to an increase in the smuggling of items such as electronics. This is also creating a shortage of dollars.”

After reaching a record low of Rs239.94 against the dollar on July 28, the local currency had recovered to Rs213.90 in the interbank by August 16. However, it has since continued to fall, losing Rs8.1 till Aug 26 (Friday).