KARACHI: The dollar continued to reach a new high on Wednesday as it appreciated by 3.01 against the rupee during the early morning trade in the inter-bank market. This is the third consecutive day where the rupee fell to a historic low.

“The panic in the market is primarily due to political turmoil, which will subside in a few days,” Finance Minister Miftah Ismail told Reuters, adding that he expected pressure on the rupee to fall in the next few days.

The rupee slid three per cent against the dollar by Tuesday’s close and continued its downtrend when trading opened on Wednesday. The greenback was being traded at Rs225 in the inter-bank market, according to an update by 11am. It closed at Rs222 in the interbank market on Tuesday, State Bank of Pakistan reported.

The development follows the market sentiment which apparently went down over the political uncertainty after the results of the Punjab by-elections. But, the central bank also attributes the exchange rate system and the dollar’s global appreciation to the downturn of rupee.

Rupee reversal anticipation

Miftah also spoke with Bloomberg on the rupee’s downward slide.

“Fundamentally the rupee is fine, there is not much pressure on the rupee in the market and we should be okay, and I think that there may be some reversal,” he said.

He reiterated that political uncertainty brought the country to such a stage as it was “fine” in terms of real economic fundamentals.

Fitch Ratings agency on Tuesday downgraded Pakistan’s outlook from stable to negative in view of the significant deterioration in the country’s external liquidity position and financing conditions since early 2022.

“Some pressure on the rupee will also subside as imports dropped to below $6 billion in July compared with $7.8 billion a month earlier,” Miftah said.

Pakistan faces economic turmoil, with fast depleting foreign reserves, a declining currency and widening fiscal and current account deficits, and the rupee has lost 18% of its value since Dec 21.

“There is panic in the market, I fear it (the rupee)will go down further,” Zafar Paracha, Secretary General of a foreign exchange association, the Exchange Companies of Pakistan, told Reuters.

Paracha said he did not see any reason for the depreciation in the rupee other than a possible IMF pre-conditions. Neither the government or the IMF have said anything about the need for any further depreciation of the currency, though Pakistan recently adopted a market-based exchange rate under advice from the IMF under the economic reforms agenda.

Reserves have fallen to as low as $9.8 billion, hardly enough to pay for 45 days of imports.

“The recent movement in the Rupee is a feature of a market-determined exchange rate system. Under this system, the current account position, relevant news items, and domestic uncertainty together determine daily currency fluctuations,” the SBP said in a series of tweets.

It also shared graphs on the dollar’s performance against the rupee. The central bank was of the view that the recent rupee depreciation against the dollar was also in large part a global phenomenon. “Globally, the US$ has surged by 12% in the last six months to a 20-year high, as the Fed has aggressively raised interest rates in response to rising inflation.”

This is an intraday update. The story will be updated throughout the day.