The rupee extended its losses for the second consecutive session this week, falling by Rs1.64 against the dollar in the interbank market on Tuesday.
Information shared by the Forex Association of Pakistan (FAP) confirmed that the local currency had fallen to Rs221.5 per dollar by 12:21pm after depreciating 0.74 per cent.
FAP Chairman Malik Bostan said the dollar’s fee had risen due to elevated demand for the dollar for duty-free vegetable imports from Iran and Afghanistan.
He said the federal government must be sure that dollar being bought for imports were not “misused”.
Bostan stated he anticipated the “sharp decline” within the rupee’s worth to cease as soon as funding amounting to $4 billion was acquired from pleasant international locations.
The FAP chairperson claimed that commercial banks were buying the buck at higher rates due to which the rupee’s worth was declining.
“The difference in the rates between the interbank and open markets has risen by Rs10 [per dollar]. This difference had been removed via great difficulty however now higher rates in the interbank market are affecting the open market,” he commented.
Amid the widespread destruction of crops by the recent floods, the federal government had last week granted exemption of sales tax and withholding tax on the import of tomatoes and onions until December 31. Since then, several trucks carrying the 2 objects have crossed into Pakistan via the Taftan, Chaman and Torkham borders.
Meanwhile, Tresmark’s Head of Research Komal Mansoor said political uncertainty and lack of clarity on future inflows from friendly countries were pushing the rupee decrease. As well as, remittances were expected to decline in the coming months, she added.
“As per Tresmark estimates, REER for August-end should go up to 98.50 with parity at 218/$. So we see an adjustment to keep REER around the 92-95 level and that would translate to 222-226 vary. If the IMF cash shouldn’t be adopted up by pleasant countries’ cash, PKR will again feel the heat,” she said.
The real effective exchange rate (REER) is the weighted average of a country’s currency in relation to an index or basket of other main currencies. The weights are determined by comparing the relative trade balance of a country’s forex against each country inside the index. This exchange rate is used to determine an individual country’s currency worth relative to the other main currencies in the index.
The REER is used to evaluate how a currency is fluctuating against many others at once, and can be used in international trade assessments.
The PKR had fallen to a record low of 239.94 on July 28. It had then recovered for 11 consecutive sessions, closing at Rs213.90 in the interbank on Aug 16.
However, the local currency had started falling again from Aug 17, losing Rs8.02 till Aug 29. It gained briefly for 3 sessions against the buck before declining again on Friday.