Rupee dives Rs7 vs dollar in open market

Currency dealer blames dollar smuggling for rupee’s slump

September 06, 2022

Pakistani currency continued to weaken for second consecutive working day on Monday, depreciating 0.40% (or Rs0.88) and closed at Rs219.86 against the US dollar in inter-bank market.

However, in open market, the local currency nosedived Rs7 to Rs232 against the greenback, reported the Exchange Companies Association of Pakistan.

“Rupee is coming under renewed pressure in the wake of flood losses of over $10 billion caused to the national economy,” said Pak-Kuwait Investment Company Head of Research Samiullah Tariq while talking to The Express Tribune. “Dollar smuggling from the country has sparked the rupee’s slump in the open market,” remarked a currency dealer.

The dealer blamed authorities for failing to curb dollar smuggling despite hinting at illegal outflow of the greenback. The rupee has cumulatively decreased 0.58% (or Rs1.26) in the past two working days in the inter-bank market. It hit a one-month high in the range of Rs213-214 in August and an all-time low at Rs239.94 on July 28, 2022.

Tariq pointed out that the floods had changed the country’s economic outlook, adding that partial devastation of agricultural output may lead to an increase in imports compared to the pre-flood situation when efforts were being made to curtail them.

“There are chances the current account deficit will remain elevated in the post-flood scenario,” he said.

The floods may also impact industrial production due to reduction in demand. Consequently, the economic growth will come under the axe. “Movement of the rupee mainly depends on the receipt of foreign aid,” he said, adding that Pakistan was expected to receive a significant amount to help fight flood devastation and rehabilitate people.

Published in The Express Tribune, September 6th, 2022.

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