The State Bank of Pakistan said in a Twitter statement that the recent rupee depreciation against the US dollar is in large part a global phenomenon. The post reads; “Recent Rupee depreciation against the US$ is also in large part a global phenomenon. Globally, the US$ has surged by 12% in the last 6 months to a 20-year high, as the Fed has aggressively raised interest rates in response to rising inflation.”
2/4 Recent Rupee depreciation against the US$ is also in large part a global phenomenon. Globally, the US$ has surged by 12% in the last 6 months to a 20-year high, as the Fed has aggressively raised interest rates in response to rising inflation. pic.twitter.com/Ng6jxwC0LJ
— SBP (@StateBank_Pak) July 19, 2022
Rupee Depreciation Against the US Dollar is Subjected to Various Factors
The central bank explained in a series of tweets how some market factors are influencing the rupee depreciation against the US dollar. It said; “The recent movement in the Rupee is a feature of a market-determined exchange rate system. Under this system, the current account position, relevant news items, and domestic uncertainty together determine daily currency fluctuations.”
1/4 The recent movement in the Rupee is a feature of a market-determined exchange rate system. Under this system, the current account position, relevant news items, and domestic uncertainty together determine daily currency fluctuations. pic.twitter.com/VXWI7lVSWY
— SBP (@StateBank_Pak) July 19, 2022
The statement noted that when evaluated in real effective terms against a basket of currencies in which Pakistan trades and adjusts for inflation, the depreciation in the rupee since Dec 21 has only been 3%. “This is a better measure of the strength & competitiveness of a currency than the US$ rate,” it said.
PKR Dives to 222 per USD
Yesterday, the dollar appreciated further in the interbank market hitting a new high of 222 against the Pakistani rupee. The foreign currency gained Rs6.79 during the intraday trade, the highest day-on-day depreciation after June 26, 2019, when it rose by Rs6.80. The experts believe that the dollar maintains its upward trajectory due to the ongoing political uncertainty and the landslide victory of PTI in the Punjab by-elections. Abdul Kadir Hussain, head of fixed-income asset management at Dubai-based Arqaam Capital, said; “Political uncertainty is back again. USD/PKR goes higher, default risk rises, but also questions arise around the IMF deal. All of it is causing a meltdown.”
Read more: Pakistani Rupee Sinks to a New Record Low of 222.11 Against US Dollar
