KARACHI – The US dollar demand reached new heights on Friday, heading towards an all-time high against the Pakistani Rupee (PKR).
The interbank foreign exchange market concluded with the dollar trading at Rs168.02, marking a noticeable increase from the previous day’s closing rate of Rs167.66.
The dollar had previously hit a historic high against the rupee at Rs168.44 on August 26, 2020. Currency experts attribute the surge in demand to various factors, including elevated external payments and heightened demand ahead of upcoming weekly holidays.
The sustained high demand for the US dollar has created a challenging environment for the Pakistani Rupee, which is struggling to maintain its value in the foreign exchange market. Economic analysts suggest that external payment obligations have been a driving force behind the surge in dollar demand. Additionally, the anticipation of weekly holidays has further fueled the need for the greenback.
Despite the release of remittance data by the State Bank of Pakistan (SBP) earlier in the day, indicating an increase in worker remittances, the rupee failed to find support. The SBP reported that workers’ remittances had surged to $5.36 billion during the first two months of the current fiscal year, with remittances reaching $2.66 billion in August 2021 alone.
This marks the sixth consecutive month where remittance inflows have averaged around $2.7 billion and the fifteenth consecutive month that they have exceeded the $2 billion mark. While this data underscores the crucial role played by overseas Pakistanis in supporting the country’s economy, it seems insufficient to counterbalance the current surge in US dollar demand.
Currency experts emphasize that the external payments, coupled with the impending holidays, have created an environment of heightened uncertainty in the foreign exchange market. Investors and businesses alike are closely monitoring the situation as the Pakistani Rupee faces increasing pressure.
The surge in the US dollar against the Pakistani Rupee highlights the delicate balance that emerging market currencies often navigate. External economic factors, geopolitical events, and domestic economic policies all contribute to the volatility observed in currency markets.
As the situation unfolds, it becomes imperative for economic policymakers to carefully assess the impact of external payments on the country’s foreign exchange reserves. Additionally, measures may need to be taken to address the factors contributing to heightened demand for the US dollar.
The US dollar’s ascent to near all-time highs against the Pakistani Rupee underscores the challenges faced by emerging markets in maintaining currency stability. Economic authorities will need to adopt a proactive approach to manage the situation and explore strategies to mitigate the impact of external payments on the exchange rate. Investors and businesses are advised to stay vigilant in these uncertain times, seeking expert advice to navigate the evolving dynamics of the foreign exchange market.
