The rupee plunged as much as 3.2 pc in value against the US dollar on Wednesday causing a panic situation in the open market as dealers preferred to hold forex instead of selling it.
In a statement released by Finance Minister Ishaq Dar, it was stated that certain elements were taking undue advantage of political uncertainty and cashing it as an opportunity to make money in the foreign exchange market.
By midday on Wednesday, the dollar had risen to Rs108.50 against the rupee before settling at Rs108.25 at day end. This was accounted for as the largest single drop in the currency since 2008 and the lowest rupee value in three and a half years.
The uncertainty in the currency market is shaking up investor confidence, Forex Association of Pakistan President Malik Bostan was reported to have stated by a local media outlet.
Currency dealers are in a state of panic because of uncertainty, he stated further.
He further added that what is more baffling is the fact that the government vowed to maintain currency rates. Bostan further explained that there is market talk regarding the government intent to devalue the rupee, but no one saw this coming so soon.
Later, the SBP issued a press statement supporting the fall in the value of the rupee. “The current exchange rate is broadly aligned with the economic fundamentals,” SBP statement read on Wednesday.
The move was surprising because the SBP had supported the rupee against the dollar by intervening in the open market during the last few years of the ruling government much to the woes of exporters who were of the view that artificially supporting the local currency was rendering Pakistani exports uncompetitive in foreign markets.
Analysts are of the view that the government still favours a policy of keeping the rupee value stable but is unable to do so due to the mounting pressure to devalue the rupee because of the negative trade balance- rising imports and declining exports.
