PKR drops by Rs 1.56 on the interbank market – Business
The rupee extended losses for the second consecutive session this week, falling by 1.56 rupees against the dollar on the interbank market on Tuesday.
Data shared by the State Bank of Pakistan showed that the local currency closed at 221.42 rupees to the dollar after dropping 0.7 per cent.
Separately, PKR was trading at 232 rupees to the dollar in the open market around 4 pm, according to the Forex Association of Pakistan (FAP).
Malik Bustan, Chairman of the FAP Board of Directors, said the price of the dollar rose due to the increased demand for dollars for import duty-free vegetables from Iran and Afghanistan.
He said the government had to ensure that dollars bought for imports were not “misused”.
Bustan said he expects the “sharp depreciation” of the rupee to stop once it receives funding of up to $4 billion from friendly countries.
The head of the FAP claimed that commercial banks were buying US currency at higher rates due to the depreciation of the rupee.
“The difference in rates between open markets and interbank markets has increased by Rs 10 [per dollar]. This difference was removed by great difficulty but now the high interest rates in the interbank market are affecting the open market.
Amid the widespread damage to crops caused by the recent floods, the government last week granted an exemption from sales tax and withholding tax on importing tomatoes and onions until December 31. Since then, several trucks carrying these two items have crossed into Pakistan through the Taftan, Shaman and Torkham borders.
Meanwhile, Tresmark’s head of research, Komal Mansur, said political uncertainty and uncertainty about future inflows from friendly countries are pushing the rupee lower. In addition, remittances are expected to decline in the coming months.
“According to Tresmark’s estimates, the REER for the end of August should rise to 98.50 with parity at $218/$. So we see an adjustment to keep the REER around the 92-95 level and that would translate to a 222-226 range,” she said. International friendly countries money, the PKR will feel the heat again.
The real effective exchange rate (REER) is the weighted average of a country’s currency in relation to an index or basket of other major currencies. Weights are determined by comparing the relative trade balance of a country’s currency against each country within the index. This exchange rate is used to determine the value of an individual country’s currency in relation to the other major currencies in the index.
REER is used to assess how a currency fluctuates against many other currencies simultaneously, and is also used in international trade valuations.
PKR had fallen to a record low of 239.94 on July 28. It then recovered for 11 consecutive sessions, closing at Rs 213.90 at the Interbank on August 16.
However, the local currency started declining again from 17th August, losing 8.02 rupees till 29th August. It rose briefly for three sessions against the dollar before declining again on Friday.