Rupee free-fall continues; dollar hits Rs206.46

Rupee free-fall continues; dollar hits Rs206.46

Rupee free-fall continues; dollar hits Rs206.46
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KARACHI: The rupee continued free-fall on Wednesday, as the dollar jumped to another record high of Rs206.46 in the interbank foreign exchange market, dealers said.

The rupee fell Rs1.30 to end at Rs206.46 against the dollar from the previous day’s closing of Rs205.86 in the interbank foreign exchange market.

Experts said the local currency is under immense pressure due to foreign payments and a significant decline in the foreign exchange reserves.

The rupee recorded a fall of Rs48.92, or 31.05 per cent, decline since the start of the current fiscal year. The exchange rate was recorded at Rs157.54 against the dollar on June 30, 2021, compared with the current level of Rs206.46 on June 15, 2022.

The experts said that the upsurge in the international oil prices also resulted in the rupee depreciation. However, the lack of foreign exchange reserves are the major concern for the market, they added.

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The official foreign exchange reserves of the State Bank of Pakistan (SBP) fell $497 million to $9.226 billion by the week ended June 3, 2022, compared with $9.723 billion a week ago, i.e., May 27, 2022.

Previously, the foreign exchange reserves held by the central bank were recorded at $9.233 billion on December 6, 2019.

The foreign exchange reserves held by the central bank witnessed a record high of $20.146 billion by the week ended August 27, 2021. Since touching the peak, the central bank’s foreign exchange reserves witnessed a continuous decline. The official forex reserves of the State Bank of Pakistan (SBP) fell around $10.92 billion by the week ended June 3, 2022 from touching the peak.

Overall, the foreign exchange reserves of the country declined $595 million to $15.176 billion by the week ended June 3, 2022, compared with $15.771 billion a week ago.

The market was expecting inflows from the International Monetary Fund (IMF), as the government had done much against their demand.

The government had twice increased the prices of petroleum products since May 26, 2022 to satisfy the IMF for the release of the next tranche of around $1 billion.

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Although, since the announcement of raising the petroleum prices, the rupee witnessed a recovery. However, the falling foreign exchange reserves of the central bank once again put pressure on the local unit.

The government on May 26, 2022 decided to partially withdraw the subsidy to get the next tranche of the IMF, while the rupee sharply made gains against the dollar. The local unit made a recovery of Rs4.42 against the dollar during the last five sessions.

The rupee remained under pressure against the greenback during the current fiscal year. The State Bank of Pakistan (SBP) took various measures to support the balance of payments position and the local currency. However, the measures could not help the rupee recover losses.

The SBP on May 23, 2022 announced a sharp increase in the key policy rate by 150 basis points to 13.75 per cent from 12.25 per cent.

Recently, the government announced a complete ban on imports to support the balance of payments position and help the rupee stabilise. However, these measures appeared in vain, as the exchange rate massively deteriorated on June 15.

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