Rupee extends losses, weakens to 119.50/dollar in open market

KARACHI: Rupee extended losses on Wednesday to trade at 119.50/dollar, hitting an all-time low against the US currency and traders expect the currency to remain under pressure on importers demand amid low supply of the greenback.

The rupee fell to 119.50/dollar in an intra-day trade from Tuesday’s close of 118.40. However, it managed to close at 118.90/dollar, as per rate quoted by the Exchange Companies Association of Pakistan (ECAP).

Analyst said the weaker rupee is likely to fuel inflation, putting pressure on the central bank to raise policy rate despite an economy struggling to grow in the face of the ongoing political crisis in the country and upcoming general elections.

Meanwhile the association called an urgent meeting with the representatives of the exchange companies late in the evening to get support for the rupee.

“The members of the meeting have decided that the rate of US dollar need not exceed Rs118.40 for purchase and Rs118.70 for sale,” an ECAP statement said.

The association has advised all the companies to follow the cap strictly. “In case of violation the ECAP will penalise in the first instance, if the breach occurs again, the case will be referred to the State Bank of Pakistan (SBP),” it added.

A dealer said the market is facing huge dollar demand while supply of the greenback remained very low from the central bank and the exchange companies.

“The foreign currency demand from the Umrah passengers is also causing the rupee to fall,” the dealer said.

In the kerb market, the rupee depreciated by 1.2 percent in a week.

M Zafar Paracha, secretary general of ECAP, blamed smuggling of foreign currencies for the scarcity of dollars as well.

“There were no dollar sellers in the market,” Paracha said, and added that smugglers were purchasing dollars at higher prices so they could use the currency to whiten illegal/undeclared money under the amnesty scheme.

“Those who invested their undeclared money in the US currency wanted to take the advantage of amnesty scheme,” he said, demanding the government to put an end to such illegal activities.

The rupee’s sudden plunge to record lows in the kerb market is also attributed to increasing depreciation pressures on the domestic currency.

Resultantly, people are buying dollars from the open market and depositing to their foreign currency accounts.

However, the prime minister’s advisor on finance has repeatedly said that there would be no further currency depreciation. The rupee closed steady at 115.61 against the dollar in the interbank market.