Karachi: Rupee weakened 1.34 percent to close at a low of 128/dollar in the open market despite ongoing talks between the government and International Monetary Fund (IMF) aimed at securing a potential financing deal for external funding and to bridge widening current-account and fiscal deficits, dealers said.
They added that the rupee fell sharply on panic dollar buying following unconfirmed reports about devaluation of currency to win praise from the IMF. The rupee closed at 126.30 on Friday. The currency was stable at 125.50/60 at the close of trade on Thursday.
However, volatility kicked in since Friday on speculations fuelled by media reports that the government had agreed with the IMF team to devalue the currency to 130/135 in the period to come.
Some dealers quoted the rupee trading as low as 128.50 to the dollar. “There was a clear sign of heavy dollar buying. That created shortage of dollars in the kerb market,” said Zafar Paracha, the general secretary at Exchange Companies Association of Pakistan.
“The uncertainty about the IMF bailout and the future direction of the exchange rate encouraged investors to rush to purchase the greenback.”
The rupee closed flat at 124.25 against the dollar in the interbank market. The IMF mission is currently visiting Pakistan, holding a third round of talks with the government to discuss the economic challenges being faced by the country.
Finance Minister Asad Umar had clarified that the government had no plan to approach with the IMF to seek a new bailout. However, The United Nations Conference on Trade and Development reported that the government might opt for a bailout package from the IMF.
The SBP’s net liquid forex reserves have declined to $9.0 billion as of September 19 compared with $9.8 billion at the end of FY18.
Malik Bostan, president, Forex Association of Pakistan, said the money changers had an urgent meeting with Arshad Bhatti, director, foreign exchange department at the central bank to discuss the renewed pressure on the currency.
“We have recommended a set of steps with the SBP’s official aimed at stemming a sharp decline in the rupee in the open market,” Bostan told The News. “We hope the rupee will stabilise if some of the measures as discussed with the SBP’s official get implemented by the government and the central bank.”
Bostan suggested the government to take measures to curb cross-border dollar smuggling to stop rupee from falling further. Market watchers said the indecisiveness of the PTI government about the IMF new programme has spooked investors in the forex market.
Some traders still believe the rupee to face a new round of devaluation in the interbank market by the government to make a final push to secure the new IMF loan within days or weeks as it seeks to overhaul the ailing economy.