Dollar reached Rs 150
18 May, 2019
ISLAMABAD: The rupee continued to fall to record lows on Friday, days after the government agreed in principle to a $6 billion loan from the International Monetary Fund (IMF). The rupee, which lost 3.6 per cent on Thursday to close at 146.2 against the US dollar in the interbank market, dropped further on Friday selling at Rs 149.50 in the interbank market and Rs 150 in the open market, dealers said.
The stock market also declined on Friday, with the benchmark KSE-100 index shedding 804.5 points to close at 33,166.6, down 2.4 per cent.
The market opening at 33,971 remained Friday’s high, whereas the benchmark KSE-100 Index hit a day’s low at 33,006 points. As many as 63.3 million shares – worth Rs2.7 billion – of the benchmark index companies changed hands during the session.
The fall in rupee value reflects the IMF’s condition for a ‘market-based exchange rate mechanism’, which will see limited intervention by the central bank now, said Saad Hashmi, chief economist and research director at the Topline Securities in Karachi.
While the exact conditions of a final IMF deal are still unknown, Sunday’s staff-level accord, which must still be approved by the Fund’s board in Washington, said a ‘market-determined’ exchange rate will help the financial sector. This points to less support from the State Bank of Pakistan, which at present underpins the rupee in a de facto managed float system.
Late on Thursday, the SBP issued a statement saying the sharp fall in the rupee ‘reflects demand and supply conditions in the foreign exchange market’ and will help in correcting the market imbalances.
Adviser to Prime Minister on Finance Abdul Hafeez Shaikh said the other day that it is the SBP’s monetary policy committee which is responsible for determining rupee-dollar exchange rate keeping in view the foreign currency demand and supply situation of the country.
President Forex Association of Pakistan Malik Bostan says the rupee is expected to depreciate by a further 15 to 20 percent against the dollar by December this year.
The SBP is expected to further tighten the monetary policy stance on May 20 by increasing policy rate by 50-100 basis points to curb aggregate demand and ensure microeconomic stability.