KARACHI: Extending overnight losses for almost the same reasons, the rupee hit an all-time low of Rs298.93 against the US dollar in the interbank market on Thursday.

In the open market, the local currency lost Rs2 to settle at 299.

Meanwhile, the foreign exchange reserves of the State Bank of Pakistan (SBP) declined by $74m to $4.38bn for the week ending on May 5, the central bank reported on Thursday.

The total reserves of the country were down by $53m to $9.99bn. Commercial banks’ reserves, however, recorded a paltry rise of $21m to $5.6bn during the week.

SBP reserves fall by $74m to $4.38bn

There was a consensus in the financial market that the steep devaluation of the rupee against the dollar was not solely the direct outcome of the deteriorating political situation. Instead, it was widely believed that large payments from Pakistan allowed the dollar to gain strength.

The State Bank of Pakistan (SBP) reported that the dollar rose by Rs8.71 or 2.91pc on Thursday from overnight closing of Rs290.22. In the last two sessions, the greenback appreciated by Rs14.08.

However, currency dealers said the dollar depreciated to Rs292 when it was sold in tom value (tomorrow value).

Atif Ahmed, a currency dealer in the interbank market, said: “The market is expected to open at Rs292 or slightly above on Friday as the tom value of the dollar remained around Rs292.”

He said a large bank had been buying dollars since Wednesday which boosted the demand in the limited interbank market.

The SBP has allowed a few banks to open letters of credit for the import of goods and raw materials.

When the National Bank of Pakistan started buying dollars for large payments, the market lost the balance, pushing the dollar price to Rs298.93.

“At the time of closing on Thursday another large private bank started selling dollars which suppressed the demand and the dollar prices fell in the range of Rs290-292 for tom value,” added Mr Atif.

The rupee depreciated by 5.05pc during this month, 24.25pc in the current calendar year and 31.47pc since the start of the current fiscal year.

“The market is extremely anxious over the political developments in the country. With deteriorating sentiments, amidst plunging reserves and lack of clarity on the IMF front, there is no stopping the dollar as it surged to 299 before sharply recovering on suspected central bank intervention,” said Komal Mansoor, Head of Research at Tresmark.

Published in Dawn, May 12th, 2023