The US dollar rose by Rs1 in the past two days and reached a two-week high of Rs134 in the interbank market Friday morning.
The green back was worth Rs132.6 at the close of the market on October 7 but surged by 43 paisas the next day and 97 paisas today. It was trading at Rs134 in early hours, more than a rupee higher than the rate it has maintained since October 23.
The dollar has appreciated more than 25% against the rupee since December 2017 and remained very volatile in the last four months. Since mid-July, it rose or fell sharply on at least three occasions, witnessing its highest ever single-day gain of Rs9.3 on October 9.
The rupee’s devaluation against the dollar has pushed prices up. Consumers are paying more on imported items and local products that use imported raw material (that is paid for in dollars). For example, car makers have increased prices because they import 70% of their parts while petrol prices have also gone up.
Besides causing inflation, it has kept people on their toes regarding the rate it will settle at.
Shortly after forming the government, former finance minister Ishaq Dar adopted a policy of managed exchange rate and kept the dollar at around Rs105. Despite calls from local and international experts to devalue the rupee, which they said was artificially inflated, Dar’s government kept it at the same level till December, 2017.
However, once Dar left, the rupee went through several episodes of depreciation to reach its current level.
Some experts say the dollar already appreciated a lot and will settle around Rs135, but others say it may increase even further since the dollar is on the rise against major currencies of the world.
The inter-bank rate is the benchmark to measure the dollar’s actual rate and it is usually slightly lower than the open market rate. Trade in the open market starts after 11am and the dollar opened at Rs133.6 in the open market, up 60 paisas compared to the previous day’s rate.