The US dollar continues to slide in the open market and is now trading at its lowest level in two months.
The green back fell slightly, by 20 paisa to be precise, on Wednesday morning and traded at Rs138.3. The last time the dollar traded around this level was on December 4.
The dollar had kept buyers and sellers on their toes last year because of volatility in its prices and hit its all-time closing high of Rs140.3 in November last year. It fell below that level shortly after but mostly kept trading above Rs139.
However, in the last two weeks the dollar fell by nearly Rs1 and reached its current level. The dollar’s downward slide comes after the central received dollars from friendly countries that helped its foreign exchange reserves jump to a five-month high.
In 2018, the dollar appreciated 27% against the rupee, witnessing two of its biggest ever single day jumps in the short span of one-and-a-half months. It was one of the most volatile years in terms of exchange rate uncertainty.
Experts attribute last year’s rise in dollar rates to our depleting foreign exchange reserves, which fell below $7 billion in December. This level was not sustainable beyond two months of import payments. The shortage of dollars had kept rupee under pressure for most of 2018 and resulted in its devaluation.
However, the government was able to secure back-to-back aid packages from Saudi Arabia and the UAE during last year’s visits by Prime Minister Imran Khan to these friendly countries. As Pakistan started receiving these loans, the dollar first became stable and then kept falling, albeit in paisas.
Last month, Pakistan received $1 billion each from the Saudi government and the UAE, which pushed its foreign exchange reserves to a five-month high of $8.8 billion. The Saudi government has dispatched the entire $3 billion it had pledged in support of our foreign exchange reserves, but the UAE will send another $2 billion soon. China has also committed at least $1 billion to help Pakistan increase its foreign exchange reserves.
Previously, experts had predicted that the dollar may touch Rs150 but the recent foreign exchange inflow has prevented the rupee from falling further. Presently, Pakistan is negotiating a loan package from the International Monetary Fund (IMF) but a breakthrough in talks is awaited. Experts say the IMF would set difficult economic reform targets for Pakistan, including a free-float exchange rate, which may result in further depreciation of the rupee. However, others argue that the rupee has already depreciated enough to reach its real value against the dollar.