KARACHI: After suffering massive loss in early trade on Friday morning, rupee made a sharp recovery against the US dollar in interbank market.
It was quoted trading at 165/166 and was finally closed at Rs 166.5 after State Bank of Pakistan (SBP) intervention.
The analysts believe that the SBP intervened and injected dollars in the market.
Further devaluation of local currency against the US dollar was witnessed in interbank trading on Friday morning as the greenback hit an all time high of 170.5 during intraday trading.
The Pakistani rupee was quoted to be trading at 170.5 in the interbank, sliding to its lowest since June 2019 in early trade.
Some experts claim that the depreciation is due to the slash in the policy rate resulting in hot money leaving the economy.
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 foreign 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.