Karachi, October 30, 2023 – The US dollar maintained its dominance for the sixth consecutive session against the Pakistani Rupee (PKR), closing at PKR 280.95.
This persistent decline in the PKR has raised concerns among traders and analysts alike, as the local currency has depreciated by approximately PKR 2.17 or 0.77 percent since its closing rate of PKR 278.79 on October 20, 2023.
On a day-to-day basis, the PKR lost 38 paisas to the dollar compared to the previous Friday’s closing rate of PKR 280.57 in the interbank foreign exchange market, underscoring the volatility in the currency market.
Currency experts and financial analysts point to several key factors contributing to this significant decline in the rupee’s value. These include decreasing foreign exchange reserves and a surge in demand for import payments, which have jointly impacted the stability of the rupee, leading to its continuous depreciation.
One major concern is the diminishing foreign exchange reserves. According to experts, the country’s foreign exchange reserves dropped by $257 million, reaching $12.656 billion by the week ending October 20, 2023, compared to $12.913 billion in the previous week. The decline in foreign exchange reserves can directly affect a nation’s ability to maintain a stable currency value.
Similarly, the official foreign exchange reserves of the State Bank of Pakistan (SBP) also experienced a significant decrease, falling by $220 million to $7.494 billion by the week ending October 20, 2023, compared to $7.714 billion just one week prior. The reduction in the central bank’s reserves can limit its capacity to intervene in the foreign exchange market and support the local currency.
Analysts argue that another contributing factor to the rupee’s depreciation is the increasing demand for imports. The recent economic recovery and a surge in import activities have added pressure on the rupee. As businesses expand their operations and the economy rebounds, the need for foreign currency to fund imports has risen, resulting in higher demand for the US Dollar.
This situation has prompted a closer examination of the country’s balance of payments, as a persistent trade deficit could further strain foreign exchange reserves and the overall financial stability of Pakistan. In response to these challenges, the government and the central bank may need to consider implementing monetary and fiscal policies to address the situation.
As the depreciation of the Pakistani Rupee against the US Dollar persists, it is crucial for the authorities to closely monitor the foreign exchange market and develop strategies to stabilize the currency. A weaker currency can impact the cost of imports, inflation rates, and the overall economic health of the nation. For businesses engaged in international trade, fluctuations in exchange rates can significantly affect their profitability and competitiveness in the global market.
Pakistani Rupee Sees 5th Straight Day Decline Against Dollar to End at PKR 280.57