Rupee plummets to all-time low of 202.83 against US dollar in interbank market

• Rupee shedsRs2.77, or 1.37%, against US dollar in interbank market.
• Local currency breaks all previous records in both interbank and open market.
• Settles at 204 against the greenback in open market.

KARACHI: The Pakistani rupee broke all records on Tuesday, dropping to an all-time low of 202.83 against the US dollar as demand increased due to oil-related payments and ambiguity regarding the revival of the multibillion dollars International Monetary Fund's (IMF) programme.

According to data released by the State Bank of Pakistan (SBP), the local currency shed Rs2.77, or 1.37%, to close at Rs202.83 surpassing its previous record low of Rs202 recorded on May 26.

Moreover, for the first time in its history, the local currency made a  historical drop of Rs4.00 in a single day and surpassed Rs204 threshold against the greenback in the interbank market during the intraday trade.

However, the market reversed the free fall and closed the day with a loss of nearly Rs3. This was the third consecutive workday free-fall of the rupee.

In the open market, the rupee closed at a historic low of 204 against the greenback, according to Forex Association of Pakistan.

Speaking to Geo.tv, Arif Habib Limited Head of Research Tahir Abbas said the currency is under pressure due to pending oil payments and rising oil prices in the international market.

“The plunge came on the back of a mammoth import bill and widened the current account deficit,” the analyst said.

Abbas added that the market is keeping a close eye on the developments regarding the International Monetary Fund (IMF) programme, which is expected to be revived after the announcement of the budget as the government is taking all possible steps to meet the conditions laid forth by the Fund.

Read more: Miftah Ismail says petrol price will increase further

The recent bearish spell began after the government hiked the price of petroleum products by a major Rs60 per litre as a result of removing subsidies — one of the main demands of the money lender.

Traders believe caution can be expected this week ahead of the unveiling of the federal budget for the fiscal year 2022-23 scheduled to be announced on June 10 (Friday), with investors expecting IMF conditions of fiscal consolidation to dominate.

Renewed pressure on the rupee on an increase in fiscal-year-end dollar demand from importers and the corporate sector will keep the local currency under pressure.

Since the beginning of this fiscal year (July 1, 2021) to date, the rupee has collectively dropped by a massive 28.74% (or Rs45.29) compared to the previous fiscal year’s close at Rs157.54.

The rupee has maintained a downward trend for the last 13 months. It has lost 33.20% (or Rs50.56) to date, compared to the record high of Rs152.27 recorded in May 2021.

Read more: Talks remain constructive, says IMF as Pakistan struggles to negotiate pace of fiscal repairs

The report about China’s $2.7 billion deposit placement, meanwhile, has failed to entice traders as they don't see it as useful for fiscal or external support.

Moreover, during the day the currency faced renewed pressure after foreign currency inflows from overseas Pakistanis through their Roshan Digital Account (RDA) dived to a 15-month low at $189 million in May 2022.