The Pakistani currency declined further, surpassing Rs282 against the US dollar in the open market on Monday. This marks the seventh consecutive working day of losses, driven by increased demand for the greenback amidst heightened political uncertainty in the country.
According to the Exchange Companies Association of Pakistan, the currency dropped by 0.08%, or Rs0.23, on a day-to-day basis in the market. According to SBP data, the domestic currency held steady at Rs279.32/$ in the interbank market on Monday. The contrasting trends in the two markets have widened the disparity in the currency’s value to Rs2.84, gradually approaching the IMF recommended maximum limit of 1.25%, equivalent to around Rs4 at current values. The spread stood at around Rs1.50 just a couple of weeks ago.
Speaking to The Express Tribune, ECAP General Secretary, Zafar Paracha said, “The demand for foreign currencies has increased by around 10% compared to pre-election times. People are buying currencies in advance to hedge against speculated further rupee depreciation. Things will normalise soon.”
Read Rupee dips again amid supply concerns
REER Appreciates
Pakistan’s real effective exchange rate (REER), the value of the local currency compared to a basket of currencies of foreign trading partner countries, “increased to 101.7 in January 2024 from 98.8 in December 2023,” according to SBP.
This trend indicates that imports have become slightly cheaper while exports have become less competitive, presenting a challenging outlook for the balance of trade going forward.
Earlier, SBP maintained REER mostly around 95-96 during 2020-2023.
Published in The Express Tribune, February 20th, 2024.
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