The value of the dollar reached an all-time high against the rupee on Tuesday, reaching Rs168.9 within the interbank market.
According to an update posted at 11:39am on Mettis Global, a web-based financial data and analytics portal, the rupee slipped by 80 paisa against the dollar on Tuesday morning, continuing its streak against the greenback.
The update said the dollar was being traded at Rs168.9 at 11:41 am, compared to the previous day’s close of Rs169.6. it had been recorded at 168.9 at the day’s closing also .
Meanwhile, the greenback appreciated 70 paisa against the rupee within the open market and was being traded at Rs169.7.
The highest value of the dollar against the rupee was last recorded at Rs168.43 on August 26 last year.
The dollar had hit a 13-month high on September 10, 2021, when it reached on the brink of the record high and was traded at Rs168.02.
Since May this year, the dollar has been rapidly marching towards its peak value attained in August 2020 after foreign investments, including hot money invested in domestic bonds, started flying back to their destinations amid the pandemic impact, which began from the center of March 2020.
However, the present situation is different from the previous episodes of increase within the dollar’s value because the exchange reserves of the country are at their peak. The rising import bill played a key role. However, the fear of upper accounting deficit in FY22 is additionally a robust force convincing the buyers to book more dollars for future imports.
The widening balance of trade is creating fear among importers that the rate of exchange would further support the greenback against the local currency.
According to Zafar Paracha, Secretary General of the Exchange Companies Association of Pakistan, the worth of the dollar has been rising due to a rise within the purchase of the currency by importers and therefore the smuggling of the greenback to Afghanistan.
He said it had been after years that a black market of the dollar had emerged where the currency was being traded at a rate Rs3 to Rs5 above that within the open market.
Paracha added that the smuggling of the dollar and its illegal trade needed to be curtailed to regulate its rising value.
Faisal Mamsa of Tresmark, a terminal that tracks the worldwide currency market, said traders were testing the depository financial institution of Pakistan’s (SBP) intent all day by trading just a couple of paisas below Rs169. He urged for an intervention by the financial institution , citing “abnormal volatility in spite of increased reserves”.
“[A] weaker currency will subside to higher inflation which can then require a tighter monetary policy and hike in interest rates, adversely affecting GDP growth,” he added.
For its part, the SBP remains silent over the recent steep fall of the local currency.
SBP Governor Dr Reza Baqir, during the presentation of monetary policy last month, made it clear that the present account deficit would be above FY21.
He had said the deficit would be within the range of two to 3 per cent and therefore the rate of exchange would answer this deficit within the sort of appreciation of the dollar. He had also not identified the limit of devaluation of local currency or the purpose of stability of rate of exchange .