Rupee plunges to record low against dollar

KARACHI-Setting a new record, the rupee hit all-time low against the US dollar by touching Rs 80 in the open market on Tuesday.


The dollar-rupee parity, however, closed at record high mark of Rs 79.60 when the currency market closed its operations in the afternoon.


Badly undermined by the foreign currency's downgrading on Monday by the Standard & Poor's, the dollar-rupee exchange rate parity showed the biggest depreciation of Rs 1.8 paisa just within two days in the domestic currency market. The rupee remained under pressure against the US dollar and touched at Rs 80 starting new day's trading at Rs 79.20 paisas for buying and Rs 79.30 paisas for selling at close of open market dealings on Tuesday, a forex dealer said.


The dollar-rupee exchange rate was already experiencing volatility and the fresh downgrading of rating of foreign currency ,added, fuel to fire and triggered the depreciation of rupee against major currencies, he added.


In interbank market, rupee shed significant grounds versus the US currency in the dealings amid demand of US dollar remained high. The dollar set off Tuesday's trading at Rs 78.45 paisas, and was trading at Rs78.55 paisas at close of markets on Tuesday.


Currency analysts were of the view that the dollar-rupee exchange rate had hit the highest mark in the backdrop of S&P's credit rating evaluation which increased demand of dollars in the open market and paved way for its manipulation.


It is important to note here that S&P had lowered the country's foreign currency rating from B to CCC+ amid weak balance of payment scenario and incapability to meet debt-servicing costs.


Earlier, forex market sources had already projected that the dollar might be breaching the barrier of 80 this week during any upcoming session of forex trading in the open and interbank market in the backdrop of speculative sentiments and volatility in the local capital market.


The ongoing foreign exchange reserve crisis is being deepened as the official data revealed that by October 4, 2008; the country's liquid foreign reserves had plunged down adversely, amounting to 8.1 billion dollars.


Indicating depleting foreign exchange scenario, it is very clear to forecast where the economy is heading? The latest foreign exchange position of the country is making a negative macroeconomic outlook which would definitely lead towards the depreciation of the Pak currency further against the US dollar, a money market expert said.


Analysts also see that surge would increase the cost of imports and production leading to more inflation and more financial burden on the consumers.


S& P's had indicated in its report that given frequent adverse Pakistan's external liquidity position, country seemed incapable to meet 3 billion dollars of external debt servicing pledges this year.


It is important to mention here that this rating result has come up when the country is going through a worst-ever foreign reserve crisis triggered by soaring trade and current account deficits.


On the other hand, the govt is looking for the 100 billion dollars international financial assistance from the multilateral lending agencies to recover the foreign reserve stability and the second round of 'Friends of Pakistan Association' has to be taken place at Abu Dhabi this month to think over the expected economic bailout package.


The direct repercussions of the said ratings on Pakistan capital market could hit the pace of financial inflows which would lead to the investors to pull out their stake from the capital market.


On account of general economic slowdown and global markets plunge accompanied with credit crunch, domestic stock market would remain under pressure at least in the short-run.


The experts termed the motive of such type of evaluations as 'political' rather financial aimed at portraying negative outlook of the country.