The rupee made a slight comeback on Friday after the dollar fell to Rs132 in the opening hours of the interbank market.
The dollar hit Rs132, down by Rs1.9 from the previous day’s tally, recovering slightly from the latest round of depreciation that saw it lose 7.4% of its value in a single day.
On Tuesday, the dollar traded at an all-time high of Rs138 and closed slightly below Rs134, up Rs9.26 from Rs124.3 of the previous day — its biggest one-day hike ever — as the market reacted to news of Pakistan formally seeking financial assistance from the IMF.
After remaining close to the Rs134 level for two days, it came down Friday morning as $1 was traded for Rs132 at one point. Its final rate for the day will be determined by day end, but market analysts believe it could be due to multiple reasons including news from Bali and the state of our dollar reserves.
According to the latest data, the central bank’s dollar reserves fell only slightly, indicating a better position overall and the IMF has announced that its delegation will visit Pakistan next week after the finance minister made a formal request to the Washington-based lender in Bali on Thursday. These two developments seem to have affected market sentiments, say analysts.
Since our dollar reserves are at a four-year low of $8.3 billion, Pakistan is seeking a loan from the IMF to avoid a default on its foreign payments (like oil, machinery imports and interest on loans). However, it comes with its own set of restrictions.
The IMF has asked Pakistan to have a free float exchange rate as opposed to a managed exchange rate. This means that the central bank will not intervene in the market and let market forces determine the actual rate of the US dollar against the Pakistani rupee.
The interbank market rate is the benchmark rate to evaluate the dollar’s value, according to experts. The interbank rate determines the open market rate, which is usually slightly above the former, but does not indicate the actual value of the dollar. The dollar was trading at Rs132.75 in the open market, which is usually above interbank market.