After experiencing a significant dip, the Pakistani rupee seems to be steadying itself following a string of record lows last week.
As of Friday, the currency closed at 305.47 per dollar, reflecting a 1.15% decrease over the past five sessions. The preceding Monday, the rupee’s position in the interbank market was at 302 per dollar, and it further receded to 305.54 by Thursday. Notably, Friday ended its continual plunge, ending an eight-session streak of historic lows.
The rupee’s fall was more pronounced in the kerb market, where trading dynamics are more flexible. Over the week, it slipped from 315 per dollar at the week’s start to a more depressed 328 by Friday. These numbers come courtesy of the Exchange Companies Association of Pakistan.
Factors Influencing the Rupee’s Dip
Multiple factors have played into the rupee’s recent decline. Capital withdrawals, political turbulence, and a murky economic outlook have primarily prompted heightened demand for dollars. Additionally, adjustments made to meet the conditions of a $3 billion bailout package from the International Monetary Fund played a role. The rupee faced further downward pressure with import restrictions being relaxed under these terms. The prevailing political unrest and economic uncertainty only fueled the fire.
The State Bank of Pakistan (SBP) has highlighted that its Monetary Policy Committee is set to convene as planned on September 14.
The meeting is crucial for determining the policy rate. Despite murmurs, the SBP negated any possibility of an out-of-turn review. Many analysts foresee a rise in interest rates, predicting an uptick of a minimum of 100 basis points. Such expectations stem from the likelihood of enduring elevated inflation rates, driven by the rupee’s descent and surging energy costs. To provide context, at its previous gathering on July 31, the SBP opted to maintain the policy rate at 22%. Since September 2021, there’s been a substantial increment of 1,500 basis points in the policy rate.
