KARACHI: The State Bank of Pakistan on Wednesday reported the US dollar’s closing price in the interbank market at Rs239.65, while the banking market sources pegged the greenback at close to Rs240.75.

Speaking to Dawn, all major currency dealers in banks and the open market said the rupee has fallen to a new low against the US currency. Market sources expect further devaluation of the rupee in the coming days.

Within two months, the rupee returned to the record devalued position it attained on July 28 while the currency dealers in the banking market said the dollar broke all records as it crossed Rs240.

“The dollar is getting stronger in the international market and this is killing the weak Pakistan rupee, which has no support from anywhere,” said Atif Ahmed, a currency dealer in the interbank market.

Currency dealers said the US Federal Reserve will announce another increase in the rate due to rising inflation. US media reports suggest another 75 basis points could be added to the interest rate.

The Fed’s six-month rate is currently 3.75 per cent, while the one-year rate is 3.92pc.

Currency experts said the possible hike in the Fed rate would further strengthen the dollar in Pakistan, which means more deprecation of the rupee.

The higher dollar prices have increased the import cost of goods, thus inflating the domestic economy. Analysts and experts believe that September inflation is expected to be around 26pc. July’s inflation was 24.9pc, which increased to 27.3pc in August.

The record high inflation has eroded the purchasing capacity of most Pakistanis, which ultimately impacts growth negatively with low production and low trade.

It has already slowed down the economic growth to half of the growth noted in FY22. Earlier, the IMF saw the growth rate at around 3pc, while the latest Asian Development Bank said the growth rate could be 3.5pc in FY23.

After the inflow of $1.2 billion from the International Monetary Fund this month, the rupee remained silent for a few sessions but again started sliding downward.

“If the Fed Reserves further increase the rate, the exchange rate will go in support of the dollar in the local market,” said Mr Atif.

The open market reported a closing price of the dollar at Rs245, unchanged from previous days.

Published in Dawn, September 22nd, 2022