A recent slide in the Pakistani rupee against the basket of main currencies, primarily the US dollar, has made financial news headlines lately. In the foreign exchange market, the rout intensified and hit a multi-year low of 169 rupees.
This event occurred before the Pakistani central bank State Bank of Pakistan intervened to curb speculators’ excitement. We want to share this foreign exchange news with our readers, especially those into trading US dollars and Pakistani rupees.
We believe this latest report can enlighten and guide them regarding how they will conduct their forex activities this week. According to the Monday, September 20, 2021 report posted online by Pakistani news source The Express Tribune, in general, the odds involving the rupee are stacking versus the balance of payments and the Pakistani official currency’s long-term stability.
This situation is happening, although an official account of what happened behind the scenes is absent. The US dollar has already reached an almost 21-day high versus the major currencies basket.
This event comes following the unexpected US retail sales figures that came last week in sharp contrast to a fear of a US economic growth slowdown. The US retail sales data from last month clarifies the US Federal Reserve System’s interest rate and tapering direction.
With these facts, the US dollar will tend to surge in the future versus the leading currencies, including the Pakistani rupee, as the US central bank will commence tapering its asset purchase program. Tapering usually lifts the official currency of the United States as it suggests the US Federal Reserve System is one step near a tighter monetary policy.
Another local factor impacting the Pakistani rupee negatively is the ongoing political uncertainty in Kabul, Afghanistan. This event increases the demand for US dollars by Afghan citizens via Pakistan’s market.
Moreover, the strategy of US dollar holding has defeated both gold and stocks by a huge margin. Speculators viewed an opportunity in the foreign exchange market due to lackluster performance in other investment avenues and the increasing current account deficit.
Furthermore, they took refuge in US dollar piles lately to generate returns as gold lost grip of its shine because of the greenback’s increasing value. This event happened when the Karachi Stock Exchange or KSE-100 Index had merely been moving in a narrow band of 1,000 points for plenty of weeks.
We think that the Pakistani rupee’s plummeting action versus the US dollar should not completely concern affected parties. We learned this currency’s fall could trigger more inflows from the Pakistani diaspora.
Plus, we gathered that other factors could help, and among them is the non-resident Pakistanis’ financial support, sending record remittances reaching US$29.4 billion since the COVID-19 pandemic’s outbreak up to this year.
Another assisting factor is the recent initiative by the State Bank of Pakistan, the Roshan Digital Account. This effort provided the Pakistani government with another monetary source it could use in building foreign exchange reserves by crossing the US$2-billion level.
As we learned the predicted fall in the Pakistani rupee versus the US dollar in the coming months, we recommend our readers who will get affected by this development monitor the measures that the State Bank of Pakistan will take.
We also suggest they follow the news updates to prepare themselves and understand how to respond properly to these foreign exchange happenings involving the Pakistani rupee.