Even as the rupee continues its recovery against the dollar, the State Bank of Pakistan has said that it stands ready to undertake “calibrated intervention” in the currency markets to stabilise the value of the rupee.
“The SBP keeps its monitoring and vigilance on prevailing market trends and is always ready to act appropriately to address them whenever the situation warrants,” “Among other measures, if required, the State Bank stands ready to do calibrated interventions.”
The threat of intervention by the central bank is made credible by the fact that it currently holds near-record levels of foreign exchange reserves of close to $18 billion.
On Monday, the rupee touched a record low of Rs90.70 against the US dollar in trading on the open currency markets, prompting the finance ministry to write a letter to the central bank, asking them to investigate the matter. The rupee has since recovered sharply, trading at Rs88.25 against the dollar in the Karachi currency markets.
Reason of Pak Rupee Devaluation.
Variety of factors, including unusually large oil payments in September as well as the conversion of an estimated Rs150 billion into dollars.Other factors that influenced the decline was the panic selling of the rupee caused by statements made by US Chairman of the Joint Chief Admiral Mike Mullen, blaming Pakistan for supporting groups attacking US forces in Afghanistan, leading many in the country to believe that a military confrontation between Pakistan and the US may be inevitable.The US dollar has also appreciated significantly against other currencies in the international market as investors worry about the safety of the Euro-zone and move their assets to the dollar.
Fair value of the rupee was closer to the interbank exchange rate, which closed at Rs87.45 on Thursday. The open market rate is about Rs0.80 higher, a variation that is still slightly above normal.
By
M.Zohaib Gadit
Forex Trading Consultant
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