The value of rupee is getting down day by day and now even strikes the lowest of all time as US dollar hit at Rs 128 in the interbank market on Monday.According to forex dealers, another surprise decline of the exchange rate bumped markets when the US dollar rose by Rs 6.45 in the interbank market. Though the market was bewildered; the caretaker finance minister; an old hand in international financial institutions argued it was anticipated.
When market opened at the start of week on July 16, the rate of dollar climbed to a higher level of Rs 126, then went to Rs 125.50 before rising once again to Rs 127.50 and then more tipping to Rs 128.On the other hand, the US dollar rose by Rs 4 taking the rate to Rs 128.20 in the open market.The large trade and current account short falls show that the demand for dollars has gone beyond supply, which has made ultimately reason to driven down the exchange value of the rupee.
The main reason behind this dilemma is the gap between demand-supply of foreign exchange in the interbank market. As a result, now the rupee is Asia’s worst-performing currency this year.
Taking stock of previous surprise shocks;the rate of dollar closed on Rs 121.39 on June 14, 2018. Dollar rose by Rs 1 during that day and also spotted a rapid increase to Rs 122 at one point.Furthermore, on June 11 2018, the US dollar closed at Rs 119.84, after hitting a record high of Rs121 earlier that day.The possible reasons of increasing the value of the foreign currency were cited as more imports and a widening current account deficit.Caretaker Finance Minister hinted at the devaluation of the Rupee, during her visit to the Stock Exchange on Saturday. She also raised concern over the upsurge of twin fiscal and external deficits that have knotty effective macroeconomic management.
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According to her, the Interim Government is taking steps within its limited authorizationin order to get stability.She said for the long-term stability and development of Pakistan, domestic resource mobilization and a strong export diversification drive will be important, which will help resolve country’s domestic and external vulnerabilities in most effective manner.According to State Bank of Pakistan, even with the continual growth in exports (13.3 percent in Jul-Apr FY18) and some up tick in remittance, growing imports have increased the current account deficit to US$ 14.0 billion in the first ten months of FY18. It is 1.5 times the intensity of deficit faced during the same period last year. Since December 2017, the rupee has depreciated by about 14%. According to sources, Pakistan may knock the door of IMF in order to get escape from this situation.
