KARACHI: Speculation and uncertainty over Pakistani rupee’s value against the US dollar has pushed currency dealers to sell it a record rate of Rs125 on Wednesday, widening the spread with the inter-bank market.
As Pakistan desperately moves to arrest the slide of its foreign exchange reserves, the rupee has lost value in both inter-bank and open markets, with the spread between the two going as high as Rs3.52 as currency dealers remained worried over its future value. While the rupee slightly recovered in the inter-bank market, speculators were not convinced. The rupee dropped another Rs0.50 to trade at Rs125 to the US dollar in the open market. It recovered Rs0.25 to close at Rs121.48 in the inter-bank market.
“This (Rs3.52) is a record spread,” a currency dealer at the Dollareast Exchange Company told The Express Tribune. “Usually, there used to be a spread of Rs0.50-Rs1.50…or Rs1.75-2.”
He added the increased demand for dollar convinced currency dealers to charge a higher rate in the open market. The inter-bank market exhibited stability throughout the day. The former PML-N government and the current caretaker government have cumulatively devalued the rupee by over 15% in the last six months in a bid to revive sluggish exports and slow down exorbitant imports.
In this third round of rupee devaluation since December 2017, the rupee has weakened 5.07% in the inter-bank. Earlier, it dropped around 5% each time in December 2017 and March 2018.
The efforts, in addition to an export package of Rs180 billion and levy of additional regulatory duty on import of over 300 items during the year, have so far failed to achieve desired results.
Accordingly, the widening trade and current account deficits have continued to cause depletion in the country’s foreign current reserves, which dropped to less than two months of import cover at $10.07 billion on June 8, 2018.
Published in The Express Tribune, June 21st, 2018.