Karachi: The interbank market underwent a massive course correction on Thursday as the Pakistani rupee depreciated by Rs25.54 against the US dollar — the highest-ever single-day depreciation since the introduction of the new exchange rate system in 1999.
At the end of today’s session, the local currency closed at Rs255.43 against the US dollar after depreciating 9.61% or Rs24.54.
The local currency had started the day at Rs231.
Interbank closing #ExchangeRate for todayhttps://t.co/8oc0zHCyvM pic.twitter.com/eBX6rw3FIF
— SBP (@StateBank_Pak) January 26, 2023
The massive depreciation in the PKR’s value, which is being termed a “course correction” by market watchers, came after the removal of a price cap by the Exchange Companies Association of Pakistan (ECAP).
Many analysts also said the rupee was bound to see significant depreciation as Pakistan moved to meet the conditions of the IMF to revive its bailout program.
Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited, said it seemed like the rupee was let go today.
“This was a market-driven rate,” Rauf said. “This is a sign that we are moving closer to reviving the stalled IMF program.”
The market expert said the development was much needed as capping the inter-bank rate only led to the creation of the grey market.
“Exporters were not bringing their proceeds, while remittances declined as customers moved towards illegal channels offering premium rates,” he said.
Another market expert, on condition of anonymity, called it a “much needed step”.
“You cannot fight market forces. The market always wins,” said the analyst.
“This development will improve the dollar supply to a significant extent. The IMF programme revival is just around the corner now. We could see major news regarding it in the next 10-15 days.”
The rupee has been on a depreciating run for a while, but the magnitude of the fall has been low.