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Rupee Crashes Against US Dollar, Euro, British Pound After Moody’s Downgrade

The Pakistani rupee (PKR) crashed and incurred huge losses against the dollar during interbank trade on Wednesday, going as low as 268.725 against the greenback.

At close, the rupee depreciated by 1.73 percent and suspended movement at 266.11 after losing Rs. 4.61 against the greenback.

The local unit was all red against the dollar and opened trade at 261 in the open market. By midday, the greenback went higher against the rupee to around 267. After 1 PM, the local unit was largely bearish against the top foreign currency before the interbank close.

The rupee dropped further against the dollar today after Moody’s Investors Service (Moody’s) downgraded the Government of Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa3 from Caa1. The decision to downgrade the ratings is driven by Moody’s assessment that Pakistan’s increasingly fragile liquidity and external position significantly raises default risks to a level consistent with a Caa3 rating.

The rupee is down almost Rs. 31 since its record-breaking single-day drop of Rs. 25 in the last week of January and has since then gradually parried small losses despite economic pressure. As per exchange rate movements witnessed today, the PKR has lost over Rs. 4.6 today, its second-highest plunge since the all-time low drop.

Money changers say markets are reacting to the government’s struggle to secure a billion-dollar bailout from the International Monetary Fund (IMF). Moreover, the country’s recent inflation data for February discouraged traders and exporters from moving their dollars in exchange for domestic gains as the exchange rate downside poses even greater gains if the PKR falls further this week.

Independent analyst A H H Soomro told ProPakistani, “Inflationary trends are peaking, reflecting the pain masses have gone through. The PKR has depreciated 50% in the last 12 months increasing prices of everything, plus, delayed adjustments on gas and electricity tariffs are going to weigh in as well as IMF’s suggested adjustments undertaken. Pakistan should thank god that global oil prices are on the downtown. Otherwise, we would have been squeezed even further”.

Expect an imminent 200 to 250 bps hike, he added.

The PKR was all red against all of the other major currencies in the interbank market today. It lost Rs. 1.23 against the Saudi Riyal (SAR), Rs. 1.25 against the UAE Dirham (AED), Rs. 3.35 against the Canadian Dollar (CAD), Rs. 4.63 against the Australian Dollar (AUD), and Rs. 5.86 against the Euro (EUR).

Moreover, it lost Rs. 6.69 against the Pound Sterling (GBP) in today’s interbank currency market.

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