When I asked a well-known currency exchange dealer in Lahore who does not want to be named that why the currency market is panicking on recent devaluation of rupee, his reply was not a surprise. He said panic is not over yet. The volatility of the market will continue because the devaluation was so sudden and big that it created panic.
He further said that government did not give any hint of devaluation before this sudden fall. Government should make a formal announcement in this regard to end the panic in the market. We were not expecting devaluation before a entering into an IMF programe. When it happened, the currency market naturally reacted to it in panic.
When I asked the possible reason of this devaluation to currency market expert Mansoor Hayat, he replied, this panic in the market is not the result of black marketing of dollars. It is a controlled move and linked with IMF condition to further devalue the rupee. The rupee will end up between Rs145 to 150 in the coming days. The intervention of the state bank will stop the further fall and there will be recovery before the dollar will rise again. The volatility in the currency market will continue until government finally overcome the payment crisis and fall in the foreign reserves, he further said.
On the other hand, the State Bank of Pakistan (SBP) had explained the move as reflective of current account dynamics and a demand-supply gap in the foreign exchange market. The banking and currency regulator had stated that it will continue to closely monitor the situation and “stand ready to intervene” in case of any unwarranted volatility in the foreign exchange market.
The Pakistani currency has lost almost 40 rupees against dollar in last 6 months. Dollar was trading at Rs102 when care taker government took over the power from outgoing PML-N government in June.
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20 February, 2019