Rupee drops against dollar, other major currencies in one year

KARACHI: The Pakistani rupee has depreciated against the US dollar and other major currencies over the past 12 months. Analysts said that the central bank used the local currency as a buffer to absorb external shocks from a dollar deficit while shifting towards monetary easing to stimulate economic growth.

According to data from the State Bank of Pakistan, the rupee lost 2.36 percent against the dollar between July 15, 2024 and July 15, 2025. On July 15, 2025, the rupee closed at 284.67 per dollar in the interbank market, compared to 278.11 on the same date last year.

In addition, the local currency depreciated 6.04 per cent to 382.79 against the British pound during the same period. The rupee weakened 9.83 per cent to 332.74 against the euro, dropped over 9 per cent to 1.92 against the Japanese yen, and declined 3.58 percent to 39.67 against the Chinese yuan.

“The State Bank of Pakistan (SBP) has positioned the currency as the primary buffer to absorb external shocks stemming from the dollar deficit, especially as it shifts towards a monetary easing stance to revive growth,” said Awais Ashraf, the director of research at AKD Securities Limited.

“This approach is evident in the rupee’s depreciation against the US dollar and Chinese yuan, which dominate Pakistan’s trade basket,” Ashraf added.“However, the rupee’s depreciation is even more pronounced against other developed market currencies,” he said.

“This is because both the dollar and yuan have weakened; the dollar due to rising inflation concerns driven by new tariffs, and the yuan amid concerns of declining exports caused by elevated trade barriers.”

The SBP’s foreign exchange reserves have risen to $14.502 billion as of July 4.NBP Fund Management Limited stated in a client note that after significant devaluations in FY22 and FY23, the rupee has remained relatively stable over the past two years, depreciating only by 1.95 percent against the dollar in FY25. This stability was supported by efforts to combat currency smuggling and hawala/hundi networks, along with reforms in the exchange market implemented by the SBP. A current account surplus, bolstered by record remittances and improved interbank liquidity, also helped support the currency.

The report noted that an 8-10 per cent decline in the USD index against major currencies contributed to easing external pressures. However, the Pakistani rupee weakened by 11.7 per cent, 10.5 per cent and 3.4 percent against the euro, GBP and yuan, respectively.

Despite a real effective exchange rate nearing 98 and a favourable inflation outlook, the report predicts a depreciation of 5-7 per cent in FY26. This expectation is based on low reserves, significant financial outflows, and the need to maintain export competitiveness.