Rupee dives to another historic low of Rs175

Karachi: Rupee on Tuesday descended to yet another historic low of Rs175/ dollar that dealers partly pinned on the uncertainty prevailing over the release $1 billion tranche under IMF’s Extended Fund Facility (EFF).

Dollar closed at Rs175.27 at the end of trading in inter-bank against Rs174.43 on the previous trading day, appreciating by 84 paisas in a day.

The greenback’s continuous ascent against local unit since May 21 this year has eaten up rupee’s value by whopping Rs23.

Dollar was trading at Rs152.28 on May 2021 this year closed at Rs175.27 on Tuesday. Since the start of current fiscal year, dollar gained 11.2 percent or Rs17.73 against local unit as it was trading at Rs157.54 on June 30, 202.

The appreciation of dollar multiplied the total debt of the country and

Since May, a surging dollar has added Rs2,750 billion to country’s cumulative debt so far.

At a time when rupee is in a free fall against dollar, analysts expect the local unit to depreciate further if uncertainty continues over talks between IMF (International Monetary Fund) and Pakistan for the resumption of EFF .

Tahir Abbas, Head of Research at Arif Habib Limited said rupee deprecation in the last many months could be attributed to two factors.

Initially, it was the pressure on external front in the form of higher and costly imports especially of commodities, oil, palm oil, etc which brought the rupee under pressure, Abbas said.

He said a widening current account deficit had a direct bearing on exchange rate.

“It started rising after crude oil, palm oil and commodities started hitting highs in international market.”

Recently, he noted, the pressure came from stalled IMF loan talks as the prolonged and unending uncertainty about the fate of these parleys had been dragging local unit down against greenback. Abbas said speculations about conditions of IMF related to further hike in interest rate and more depreciation in rupee were also impacting rupee strength against dollar adversely.

He also attributed this deprecation to outflow of dollars to Afghanistan where its central bank ceased to function after Taliban takeover and the country’s dollar demand was being met from outflows from Pakistan.

Commenting on future trends in dollar-rupee parity, Abbas noted that depended on the conclusion of IMF-Pakistan talks and added it however would not be unilateral in favour of dollar.

Abbas recalled that dollar shed its value after touching Rs169 and then fell to Rs152, which reflected now dollar-rupee parity was market-determined.

The analyst anticipated the rupee to gain some value if IMF and Pakistan reached an agreement soon and forecast the dollar-rupee parity to ease to Rs170/dollar.