Rupee drops by 7 per cent against major currencies

With currency experts foreseeing tough days ahead, Pakistani rupee mainly remained weaker and during current financial year cumulatively depreciated by 0.14 to 7 per cent against major international currencies. According to official data, during last six-month period, ranging from June 2011 up to 29th November 2011, exchange rate for rupee on local currency market against international currencies, particularly US dollar, remained down. Data showing rupee’s parity with US dollar, UK pound sterling and Japanese Yen depict that local currency devalued against these currencies, respectively, by Rs2.27, Rs0.18 or 0.14 per cent and Rs0.06 or 5.66 per cent during the period under review. Official data shows that on 29th of November rupee was traded against these currencies, respectively, at Rs88.24, Rs137.53 and Rs1.13 as against Rs85.97, Rs137.35 and Rs1.07 in June this year. Rupee remained more volatile against greenback and saw an accumulative devaluation of 2.57 per cent during review period. Even on Kerb market, where trading takes place outside official market hours, rupee-dollar parity was in the latter’s favour at Rs88.20 on 29th November compared to Rs86.03 a month earlier. This marks a depreciation of Rs2.17 or 2.47 in percentage terms. An annual account of rupee-dollar parity shows that during FY10, FY11 and FY12 rupee hit highs as well as lows of Rs85.58 and Rs81.40, Rs86.50 and Rs83.93 and Rs88.38 and Rs85.79 against dollar, respectively. Euro, however, was an exception as European currency depreciated against rupee by 5.63 per cent to Rs117.91 compared to Rs124.54 in June 2011. Daily Nominal Effective Exchange Rate (NEER) of rupee increased to Rs50.35 against Rs49.75 previously with the premium standing lower at Rs0.04 from Rs0.06. The month of November proved tougher for local currency which depreciated by over Rs2 to dollar owing to a widening current account deficit and a constant contraction in the dollar-hungry country’s foreign exchange reserves. Imbalanced by a huge import bill, which inflated by over $3 billion to $13.4 billion during July-Oct FY12, Pakistan’s current account balance deteriorated to $1.5 billion against a negligible $541 million of last corresponding period in FY11. The country’s holdings of greenback is persistently going down and has depleted to Rs16.88 billion after touching the record $18 billion a few months back. “Rupee has weakened against US dollar in November as demand for dollar increased with the widening of current account deficit,” observed State Bank in its monetary policy information compendium released last month. Another reason for the rupee depreciation, central bank cited, is “outflows from financial market” that saw a cumulative flight of capital worth $ 37 million and $ 43.5 million respectively in October and November (2011). Currency experts believe that rupee would continue to lose face against US dollar and would dip as low as Rs90 by the end of this financial year. Reports that the central bank was following a regional trend of devaluing the local currency to give some relief to exporters have led to panic buying on inter-bank market where importers are said to have resorted to forward booking of dollar at a six-month exchange rate of Rs93 to further possible losses in case of future depreciation. Open market, however, stands stable with a smooth supply and demand with money exchangers surrendering around $5 to $6 million of their daily surplus supplies on the dollar-scarce interbank market.