The value of the US dollar touched Rs152 in the interbank market on Tuesday, with the rupee falling Rs0.5 compared to yesterday’s exchange rate.
The rupee fell to Rs153 against the dollar in the open market, DawnNewsTV reported.
Since the beginning of this fiscal year, the rupee has lost more than 21pc of its value to the dollar.
According to Forex Association of Pakistan President Malik Bostan, “In the State Bank of Pakistan’s view, the recent movement in the exchange rate reflects the continuing resolution of accumulated imbalances of the past and some role of supply and demand factors.”
The SBP yesterday raised its policy rate by 150 basis points to 12.25 per cent, 50bps above market expectations.
The bank had cited rising inflation as well as expectations of future inflation driven by a weak rupee, widening fiscal deficit and potential adjustments to the utility tariffs as the key drivers behind the rate hike.
The decline in the rupee’s value during the past two weeks and the lagged impact of previous bouts of depreciation have pushed up the prices of almost all essential items, including flour, dates, meat, fruit etc during Ramazan.
The bank said the “inflationary pressures are likely to continue for some time”, but added that it “will continue to closely monitor the situation and stands ready to take measures, as needed, to address any unwarranted volatility in the foreign exchange market.”
The rupee began its downward spiral last week on the back of the signing of a bailout agreement with the International Monetary Fund (IMF). The IMF had, in its statement on the programme, referred to a “market determined exchange rate”, which the financial markets did not take very well.
Resultantly, speculation broke out in the forex markets, with small and large investors looking towards the greenback, and some currency dealers hoarding dollars, leading to a shortage in the market.