KARACHI: Rupee fell to a three-week low of 109 against the US dollar in the open market on Friday after the Supreme Court in a shock verdict ousted the Prime Minister Nawaz Sharif in Panama corruption case, dealers said.
The rupee/dollar parity dropped two percent in the kerb dealings compared to the previous day’s closing amid shortage of foreign currency as dealers continued to hold greenback instead of selling. The rupee, however, remained stable at 105.40 per dollar in the interbank market.
“An apex court’s verdict about the Panama case against the sitting prime minister caused panic in the market, sending the PKR lower to 108-109 after staying stable at 107/107.50 for almost two weeks,” a foreign currency dealer said on condition of anonymity.
“There is a significant decline in the supply of dollars as no seller is willing to sell hard currency,” added the dealer. The currency dealer, however, said the markets were largely expecting the decision and they already priced it in. “But some elements used the situation to maximise their gains.”
Zafar Paracha, secretary general of Exchange Companies Association of Pakistan (ECAP) attributed the currency depreciation in the open market to an ongoing outflow of dollars from the country under hawla/hundi business.
ECAP and Forex Association of Pakistan quoted selling and buying rates at 107 and 107.50, respectively. The rupee has been under pressure since the mid of this month.
On July 5, rupee traded at 109 in the open market, taking cue from 3.1 percent plunge in its value in the interbank market. On that day,rupee closed nearly a nine-year low of Rs108.25 against dollar in the interbank market.
Rupee has not gone down to such a lowest level since December 2013. The rupee/dollar parity had been stable at 104.85/90 since December 2015. Topline Research, in a report, said rupee has been losing five percent annually during the last 10 years.
Last week, the central bank held meeting with currency dealers to stop the rupee from further falling and asked them to bring down it to the level of 107.
Most analysts see a pressure on exchange rate in the interbank market owing to volatility in the open market.
“The rupee is artificially lower in the official market. Any political turmoil could push macroeconomic fundamentals out of hand,” an analyst said.
“Since the rupee is already overvalued to the extent of 15/20 percent, 5-5.5 percent depreciation in the exchange rate cannot be ruled out in near-term.”
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