Rupee hits record low against dollar

Published April 5, 2023
The US dollar hit an all-time high of 287.29 against the local currency in the interbank market on Tuesday.—AFP/file
The US dollar hit an all-time high of 287.29 against the local currency in the interbank market on Tuesday.—AFP/file

KARACHI: The dollar again appreciated against the rupee to set a new record value of Rs287.29 in the interbank market on Tuesday.

Just a day before, the dollar had appreciated by Rs1.25 and on Tuesday it rose by Rs2.25, indicating a weakening of the economy.

The State Bank reported the closing price of dollar at Rs287.29 on Tuesday, compared to Rs285.02 a day earlier.

The currency market was not sure about the causes behind the recent depreciation, but pointed to depleted foreign exchange reserves and stalled negotiations with the IMF on the much-needed $1.2 billion tranche.

However, experts believe that the policy interest rate was one of the reasons which weakened the local currency.

The dollar has appreciated by Rs57 since Ishaq Dar took charge as finance minister in September while the greenback has risen by Rs104 since the change of government in April last year.

The Dubai factor

The rupee’s continued devaluation is held as one of the explanations for the runaway inflation, which rose to 35.4 per cent last month. Although imports have been drastically curtailed through official channels, most of the importers are buying dollars from Dubai or grey market.

The cost of bringing a dollar from Dubai is over Rs325. If importers buy dollars at this rate, the cost of imported goods would rise significantly and aggravate inflation.

However, the exchange companies maintained that dollars and other foreign currencies were easily available in the open market at the rate they announce. The Exchange Companies Association of Pakistan (ECAP) reported the bank rate of dollar at Rs289.30 compared to Rs287 a day before.

The open market rate jumped to Rs291 on Tuesday from Rs287.50 the previous day. According to dealers, the increase reflects the trend in the interbank market.

The government looks forward to receiving 15-20 per cent higher remittances during Ramazan, but the jump in dollar’s value has frustrated the business community.

Experts believe the economy is paying a heavy price for the political crisis. Currency dealers and analysts lament a whole year has been wasted due to political bickering.

Published in Dawn, April 5rd, 2023

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