US dollar reached Rs 162.47 in the interbank market on Wednesday. The US dollar rose by Rs 5.2 as trading continued for the day.
The greenback was being traded at Rs 163 in the open market ? an increase of at least Rs 6.
The rupee has been falling against the dollar following an agreement with the International Monetary Fund on a $6 billon loan with expected strict conditions, including a market-determined exchange rate.
The rupee’s official exchange rate is supported by the central bank under a de facto managed float system and many analysts consider the currency to be overvalued. According to data from the State Bank, the central bank’s foreign exchange reserves as of May 3 stood at $8.984 billion, equivalent to less than three months of import payments.
Similarly, a massive increase in the value of gold was also witnessed during this week, with the yellow metal trading at Rs 80,500 per 12 grams today.
Last week, State Bank of Pakistan Governor Reza Baqir had provided assurances that the central bank was ready to intervene in the market in case of excess volatility. Baqir explained that the government had adopted a market-based exchange rate instead of a free float or fixed exchange rate, as neither were appropriate at the time.
“In the market-based system, you consider supply and demand factors, what side they are pulling the exchange rate, and you don’t suppress them. And this is fundamental ? we keep a close eye on the market, and if there is excessive volatility […] or special pressures, the SBP intervenes. And we will continue to do so to make sure that there isn’t excessive volatility or ‘disorderly market conditions’, as economists say,” Baqir had said.
