Exchange rate hits record-setting heights amid volatility emerging from coronavirus impact on economy
The United States dollar on Thursday was fetching Rs. 167.5 in the interbank market, the highest value the two currencies’ exchange rate has reached to date.
The sharp surge followed the dollar touching Rs. 161.6 against the rupee on Wednesday; it had closed the day on Tuesday at Rs. 159.
While largely stable for the past six months, the currency market has seen much volatility since March 9—with countries across the world initiating lockdowns to curb the spread of COVID-19—when the rupee lost 3.65 against the dollar in a single day.
According to the State Bank of Pakistan, the latest drop in the rupee’s value is a result of foreign investors selling off $95 million worth of Treasury bills on March 24; the overall divestment of Treasury bills by investors in the past month has reportedly reached $1.501 billion.
Observers have claimed the exodus of foreign investors is likely due to the central bank slashing the policy rate twice in one week, bringing the interest rate to 11 percent. This suggests there will be further depreciation of the rupee in the coming days as the market stabilizes, they have added.
In a press release announcing the decision to slash the interest rate, the State Bank of Pakistan said it was designed to help the struggling economy cope with the fallout of a preventive COVID-19 lockdowns across the country. The bank said it was monitoring the situation closely and would announce further measures designed to aid the economy during this trying time as and when required.