Rupee saw a significant depreciation on Friday with dollar closing at 176 & 177 for buying & selling respectively in open market.
According to State Bank of Pakistan (SBP), Rupee closed at 175.24 against dollar in inter-bank, marked by a 0.33% day-on-day depreciation. Rupee had reached its lowest level on Friday the week before closing at 175.73 against dollar in inter-bank market. According to market sources, this value decline is a result of shift in supply & demand.
State Bank, in it’s Friday’s monetary policy announcement, increased the interest rate by 150 basis points bringing the interest rate to 8.75%. This rate hike seems to be an effort by government to reduce the current account deficit & defend the rupee against rapid depreciation.
In international market, demand for dollar increased on Friday as Austria & Germany announced new lockdowns as a means to curtail recent surge in COVID-19 cases. Meanwhile, with investors seeking safety in dollar, euro dropped to a 16 month low level against dollar. An uncertain situation in Europe would is likely to benefit dollar further as the US economy remains open indicating new future challenges in it’s European counterpart.
Next monetary policy meting has been announced for December 14th by SBP. It remains to be seen how the domestic market move amid a hike in interest rate & growing dollar demand globally. A brief stability in dollar-rupee parity, however, is not unreasonable to expect.