Dollar upward march continues, interbank trading at record Rs196.50

The US dollar continued its flight against the rupee for the sixth consecutive session on Tuesday to breach the Rs196 mark an all-time high in interbank trade, mainly due to the country's depleting foreign exchange reserves and high imports.

According to the Forex Association of Pakistan (FAP), the greenback gained Rs1.90 from the previous day's close of Rs194.60 to climb to Rs196.50 around 1:00pm.

This spell of the dollar's persistent rise against the rupee began on Tuesday last week, when the international currency hit a record high of Rs188.66. It then soared to Rs190.90 on Wednesday, rose past Rs192 on Thursday, reached Rs193.10 on Friday and climbed over Rs194 yesterday (Monday).

While the FAP data showed that the greenback closed Rs194.60 on Monday, the State Bank of Pakistan recorded the closing rate at Rs194.18. A Dawn report, while quoting the SBP's closing rate, said that the international currency was traded at higher rates before settling at Rs194.18.

The Dawn report highlighted that while the dollar kept the rupee in its strong clutch during the entire fiscal year FY22, the last two months proved the worst.

Moreover, a report said on that the when the PML-N-led coalition government took over on April 11, the dollar was valued at Rs182.3, and since then, the rupee had lost Rs11.4 or 6.2 per cent of its value.

According to currency dealers, the dollar demand never comes down, which did not allow the local currency to stay at any point. They say the higher demand for dollars is the key reason for the bullish trend in the currency market. Political foot-dragging by the incumbent government on the reversal of fuel and electricity subsidies a prerequisite for the resumption of the loan programme by the International Monetary Fund (IMF) has further eroded the confidence of stakeholders.

Meanwhile, the decline in the rupee is also fuelled by an uncontrolled increase in imports coupled with a relatively slower pace of growth in exports.

The rising oil prices have already doubled the oil import bills, but the overall imports are also at a record high. In April, imports increased by 72pc, leaving no room for the government to improve its external balance.

Moreover, foreign exchange reserves of the central bank have touched $10.3b, lowest since June 2020.

Currency dealers said the unexpectedly high imports bill and low foreign investment were not in support of the exchange rate while over $13bn current account deficit was already there as a challenge for the govt.

Exchange Companies Association of Pakistan further identified the uncertainty surrounding the release of a $1 billion tranche as another factor contributing to the rupee's decline.