Dollar at new peak of Rs177.98 against rupee

KARACHI: The rupee witnessed an unabated free-fall for the last several months, as the dollar hit a new record high of Rs177.98 at the closing on the interbank foreign exchange market on Wednesday, amid the monetary tightening announced a day ago.

The exchange rate witnessed a decline of 10 paisas in the rupee value against the greenback from the previous day’s closing of Rs177.88 in the interbank foreign exchange market.

The State Bank of Pakistan (SBP) on December 14, 2021 announced another 100 basis points increase in the key policy rate to 9.75 per cent. It was the third straight increase in the policy rate by the central bank since September 2021.

The primary objective of the central bank is to dampen inflation by discouraging demand. Same was done by the SBP in the previous policy announcement on November 19, 2021; however, the free-fall in the rupee continued due to higher dollar demand for import payments.

The dealers said the market witnessed significant dollar demand for import and corporate payments. They said due to the year-ending, many foreign corporate entities operating in Pakistan repatriate profits and dividends to their parent companies abroad.

The higher international commodity prices and rising domestic demand for foreign products have kept pressure on the demand for the foreign currency.

The dealers said the rising import bill and an expected further widening of the current account deficit adversely affected the market sentiments.

According to the official data issued by the Pakistan Bureau of Statistics (PBS), the import bill of the country surged 69.17 per cent to $33 billion during the first five months (July-November) 2021/22, compared with $19.47 billion in the corresponding months of the last fiscal year.

Likewise, the trade deficit during the months under review widened 112 per cent to $20.59 billion, compared with the deficit of $9.72 billion in the corresponding period of the last fiscal year.

To support the rupee, the government is considering measures to curtail imports. The dealers said the government should take concrete steps to discourage import of luxury and non-essential items.

The rupee remained under pressure since the start of the current fiscal year, as it fell Rs20.44, or 12.97 per cent, from June 30, 2021 closing of Rs157.54 to the closing of Rs177.98 on December 15, 2021.

The buying and selling of the dollar in the open market was recorded at Rs179.65/Rs181.20 at 3:35pm PST.

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