The trend of the US dollar making huge against rupee seems unstoppable.
LAHORE: (UrduPoint/Pakistan Point News-March 25th, 2020) The Pakistani rupee is losing value against US Dollar after it reached to Rs 162 here on Wednesday.
The trend of the US dollar making huge gains against rupees seems to be unstoppable. The dollar’s inter-bank rate had increased by Rs3 during the day so far. It jumped by Rs3.33 during the last two days and by Rs7.15 since January 1.
The recent slump in the value of the rupee was attached to the cut in the policy rate.
On Wednesday, the State Bank of Pakistan (SBP) cut the policy rate by 150 basis points, from 12.5pc to 11pc. This follows a policy cut from just last Tuesday, where the SBP cut the policy rate from 13.25pc to 12pc. The policy rate cut can be seen as a reason for hot money leaving the country. The SBP maintains that foriegn money outflows are due to a general ‘flight to safety’. Many developed countries are divesting from emerging markets due to the COVID-19 crisis, in order to have liquidity.
While stock markets are falling drastically, global economic fears surrounding the COVID-19 crisis have resulted in liquidity selling. Thereby, capital flight is a common sight as sovereign debt is liquidated.
The weakening rupee will cause huge problem for the public as previously it resulted in expensive imports, inflation and higher cost of living. The situation was expected to worsen more as the Coronavirus crisis has turned to be a threat to global economy.
