Rupee’s depreciation 'in large part a global phenomenon': SBP

• SBP says recent movement in the rupee is a feature of a market-determined exchange rate system.
• Says under system, current account position, relevant news items, and domestic uncertainty together determine daily currency fluctuations. 
• SBP says in real effective terms depreciation of local currency since December 21 has only been 3%.

KARACHI: Taking note of the sliding rupee, the State Bank of Pakistan (SBP) on Tuesday said that the local currency’s depreciation against the US Dollar was “in large part a global phenomenon”.

In a series of tweets, the central bank said that the “recent movement in the rupee is a feature of a market-determined exchange rate system”.

“Under this system, the current account position, relevant news items, and domestic uncertainty together determine daily currency fluctuations. Recent Rupee depreciation against the US$ is also in large part a global phenomenon,” said the SBP.

The state bank shared that the greenback has surged by 12% in the last six months to a 20-year high globally. It blamed the increase on the US Federal Reserve’s decision to “aggressively” raise interest rates in response to rising inflation.

“Like most advanced and emerging market currencies across the world, the Rupee has depreciated against the US$ since December 21. It has depreciated by 18% over this period,” said the bank.

The central bank added that in real effective terms, which is calculated against a basket of currencies in which Pakistan trades and adjusted for inflation, the depreciation of the local currency since December 21 has only been 3%.

“This is a better measure of the strength and competitiveness of a currency than the US$ rate,” said the SBP.

The SBP's assurance came after the Pakistani rupee shattered all previous records to fall to a new low of 224 against the dollar in afternoon interbank trade, before closing at 221.99.

According to SBP, the local currency fell by Rs6.79 in the interbank market, depreciating by 3.06% against yesterday's close of Rs215.20.

It was the highest day-on-day depreciation after June 26, 2019 when the currency fell by Rs6.80.