The Pakistani rupee plunged to an all-time low against the US dollar during intraday trade today, making history.
During the first four hours of intraday trading today, the Pakistani rupee dropped by 19 percent, and by 1 PM, the interbank rate had lost Rs. 19. After opening at 247, open market rates for the dollar rose to highs of 250–251 across several currency counters.
PKR lost 24.54 rupees at the time the market closed, depreciating by 9.61 percent to close at Rs. 255.43. Before the market closed, it posted an intraday low of 257 against the US dollar.
The local currency, which was red when compared to the dollar, started trading at 244 on the open market. By lunchtime, the dollar had risen to a high of 250 against the rupee. After 3 PM, the local currency kept falling and, until the interbank close, was trading at 255 versus the top foreign currency.
According to market sources, the local currency will today be at the mercy of market forces following the two trading sessions where it became widely accepted that neither the SBP nor exchange companies would be able to regulate changes in the value of the dollar relative to the PKR.
“It’s a delayed adjustment of the currency that is incredibly necessary to reduce grey market appeal and encourage USD flows away from hawala hundi,” independent economic analyst A H H Soomro told ProPakistani. You will observe a sharp improvement in the remittances drop once interbank is closer to open market, which will easily push the current account to surplus.
“The real improvement would be a function of new IMF plan-led structural reforms happening only after new elections,” he added.
Besides the government’s releasing its hold on the exchange rate, money changers see today’s whopping decline as a surgical reaction to the International Monetary Fund’s (IMF) demand to promulgate a mini-budget worth Rs. 200-300 billion, to it won’t release the remaining funds under its $7 billion extended fund facility to the South Asian economy. Topline Securities CEO Muhammad Sohail said, “The much-awaited PKR adjustment has been done today by allowing banks to quote rates based on market demand-supply. This was the case till Sep 2022 but later bank rate was kept in a narrow band that gave rise to the black market”.
“Now black market rate will come closer to the Bank rate. This will help in increasing exports and inward remittances through the banking channel. This may also help in reviving the delayed 9th review with IMF and inflows from friendly nations,” he added.
The nation’s top financial official has remained silent during the market response to this week’s mounting anger toward policymaking and SBP blockades as he attempts to prevent additional catastrophe. The PKR against the US$ in the interbank market has been moving in a narrow band and was being managed to show signals of stability after Ishaq Dar’s appointment as Finance Minister on September 28, 2022. In reality, PKR increased after falling to a low of Rs. 240 just prior to his appointment because he thought the currency was undervalued.
In any case, according to money changers, the market’s tremendous escalation today is caused by a shortage of dollars, which has led to a considerable increase in the disparity between interbank and open market rates.
Since the beginning of the 2022–23 fiscal year, which ends on June 30th, the official value of the rupee has fallen by 12% against the dollar. The current trends indicate that the central bank’s authority over currency is slowly giving way to the market-determined free float. ProPakistani said earlier that this would completely eradicate the power of the illicit market, but all parties involved in the situation should be prepared to witness PKR developing resistance in the sticky range over 250.
