The Pakistani rupee surpassed the much-feared Rs200 against the US dollar in intra-day trade in the inter-bank market on Thursday.
The rupee lost Rs2.41 to Rs200.80 at around 1:45 pm compared to Wednesday’s close at Rs198.39.
According to reports, Prime Minister Shehbaz Sharif expressed surprise over the free-fall in the rupee and convened a meeting to take measures to end uncertainty in capital markets.
The rupee has maintained a downturn on the tenth consecutive working day amid the second day of Pakistan-IMF talks to resume the loan programme in Doha.
The rupee has to date cumulatively dropped Rs15.11 in 10 days.
“The reason for the current rupee depreciation is the risk of default,” Pak-Kuwait Investment Company Head of Research Samiullah Tariq said on his official Twitter handle.
The default risk measured by Pakistan’s Currency Default Swap (CDS) hit a 14-year high at 16% compared to the usual 6-8% when the economy stood stable.
“The current depreciation is due to uncertainty about the gross external financing (approximately) north of $30 billion per annum as reflected in our Eurobond yields. They’re at the highest level (around 15%),” he added.
He did not agree with some of the analysts who said the latest round of rupee depreciation was due to the widening current account deficit (CAD).
“We had a $2.5 billion CAD during January 2022, but bond yields didn’t move. Last month, our CAD was $1 billion but yields went crazy,” he said.