Pak Rupee Hardest Hit in 3 Years After Asian Devaluations

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KARACHI (BE2C2) — Pakistan rupee slid the most in three years against the dollar, joining a retreat in Asian currencies that’s been fueled by Chinese yuan devaluation on Aug 11.

The rupee weakened 2.25 percent to 104.40 per dollar in Karachi, the steepest drop since May 2012, with market experts fearing further depreciation in the days to come, according to Bloomberg and local news outlets.

Its rate was Rs102.10 on Friday. It sank to a 17-month low of 104.40 on Monday. The currency has weakened more than 2 percent since China’s devaluation, compared with drops of 7.3 percent for Malaysia’s ringgit and 6.45 percent (Rs62 to Rs66) for India’s rupee.

Bangladesh’s taka also depreciated along with other regional currencies like Indonesia and some Middle Eastern countries.

“The textile lobby, mostly exporters, have been seeking rupee’s devaluation to boost exports,” said a currency dealer in the banks market according to Dawn. “Reports about 12pc fall in July exports also convinced the government to remove the cap over exchange rate.”

Since both China and India are competitors of Pakistan in textile exports and both have devalued their currencies, it seems the rupee’s devaluation was made in the wake of pressure mounted by a wave of regional currencies rout.

The government in 2013 took drastic action against the exchange rate, sending the dollar back to Rs98 from Rs109. The step was generally appreciated by common people but was criticized by economists and analysts who saw political gain behind the move.

“Now the rupee has been sent in reverse gear. There is a need to cap it somewhere close to the current price otherwise we can see a sharp increase in dollar rates within a month to touch the September 2013 price of Rs109,” said Ahmed, a currency dealer.

Meanwhile, yuan dipped to 6.40 against the dollar on Tuesday after closing at its weakest level since 2011 on Monday, hit by another slump in the mainland’s stock market and a weak central bank midpoint.

 

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