On Wednesday during interbank trade, the Pakistani rupee (PKR) plunged and suffered significant losses against the dollar, reaching a low of 268.725 per dollar.
At closing, the rupee lost Rs. 4.61 against the US dollar and was trading at 266.11 with a 1.73 percent depreciation.
The local currency opened trading at 261 with a full red value against the dollar. By midday, the dollar had increased to about 267 against the rupee. Before the interbank close, the local currency was largely bearish against the top foreign currency after 1 PM.
The senior unsecured debt and local and foreign currency issuer ratings of the Government of Pakistan were downgraded by Moody’s Investors Service (Moody’s) to Caa3 from Caa1 today, which caused the rupee to depreciate further against the dollar.
Because of Pakistan’s increasingly precarious liquidity and external position, which Moody’s believes has significantly increased default risks to a level consistent with a Caa3 rating, the decision to downgrade the ratings was made.
Since its record-breaking single-day drop of Rs. 25 in the final week of January, the rupee has lost nearly Rs. 31 and has since gradually limited small losses despite economic pressure. The PKR has decreased by more than Rs. 4.6 today, which is its second-largest decline since the drop to an all-time low, according to exchange rate movements seen today.
Markets, according to money changers, are retaliating to the government’s efforts to obtain a $1 billion bailout from the IMF (IMF). Further discouraging traders and exporters from exchanging their dollars for domestic gains was the country’s recent inflation data for February, which hinted at even greater gains if the PKR fell further this week.
According to independent analyst A H H Soomro, “Inflationary trends are peaking, reflecting the suffering endured by the masses. The PKR has lost 50% of its value in the past year, driving up prices across the board.
Delayed adjustments to gas and electricity tariffs will also have an impact, in addition to any adjustments the IMF suggests being made. Pakistan should give thanks to God that oil prices are declining. If not, we would have been even more confined.
Expect a 200- to 250-bps increase soon, he added.