ISLAMABAD/Karachi - Finance Minister Ishaq Dar on Wednesday took cognisance of the spike in the interbank rate of the US dollar against the Pakistani rupee, which has gone up to Rs108.25.

The dollar surged to its 2.5-year-high against the rupee in the interbank market. The dollar gained Rs3.12 in a single day and reached to Rs108.25 against Rs104.9 on Tuesday. The dollar value enhanced on a day when Prime Minister’s daughter Maryam Nawaz appeared before the joint investigation team probing Panama Papers case.

The finance minister has taken notice of the sudden increase in dollar value and summoned the presidents of all banks on Thursday (today) to review the situation.

Chairing an emergent meeting of the officials of the finance ministry, Dar expressed deep concern, indignation and disappointment at the fact that the current political situation is being exploited by certain individuals, banks and entities, resulting in the artificial rise of the interbank rate of the dollar against rupee, which has negatively affected foreign exchange markets.

Dar said the responsible persons and entities in this matter will be identified and appropriate action will be taken against them in national interest.

Market sources informed The Nation that dollar has gained due to uncertainty in the market and the ongoing JIT probe.

Pakistan Stock Exchange (PSX) continued its euphoric run in last few months, which pushed KSE 100-index to new record high level of 52,388 points in May 2017. However, the index recorded massive losses since June this year. The stock market came down to 45,413 on Wednesday.

However, the State Bank of Pakistan believes that the current exchange rate is broadly aligned with the economic fundamentals. “While almost all macroeconomic indicators have been showing encouraging picture, such as decade high real GDP growth, increase in investment, credit expansion to private sector, and subdued inflation; the deficit in the external account has been rising for some time.

Accordingly, the exchange rate adjusted in the market and SBP is of the view that this depreciation in the exchange rate will address the emerging imbalance in the external account and strengthen the growth prospects of the country,” the SBP stated.

The SBP said that it would continue to closely monitor the developments in the foreign exchange markets and stands ready to ensure stability in the financial markets.

It is worth mentioning here that dollar value was around Rs104 from last two and half years. Last time, the dollar value had jumped to Rs103 in August 2014 due to the prolong sit-in of the Pakistan Tehreek-i-Insaf (PTI) and Pakistan Awami Tehreek (PAT) from Rs98.82 of pre-sit-in situation.

Talking to The Nation currency dealer Bostan Malik termed the surge in greenback as deliberated, for, vested interests have exploited current political situation resulting in the artificial rise of the interbank rate of the US dollar against the Pakistani rupee, which has negatively affected our forex markets. Malik hoped situation would be normalised within couple of days.

Currency market experts believe that this was long overdue as the rupee has been relatively stable since August 2015. Further, during the last 10 years, rupee has devalued annually by 5 percent.

In the curb market NBP exchange quote was Rs105.90/106.40, lower than the interbank rate.

Local equity markets have taken this development positively with the market up by 2 percent so far. This is largely positive for Oil & Gas exploration, power (IPP’s) and textiles.

The experts in their strategy report dated June 7, had not ruled out rupee devaluation due to the widening current account deficit (CAD), which has sharply risen from $3.2b in FY16 to $8.9b in FY17, which is a 9-year high. In terms of GDP, it has risen to 3.1 percent of GDP in FY17 vs 1.3 percent in the same period last year. Rise in current account deficit can largely be attributed to 40 percent increase in trade deficit to $23b, driven by higher imports and lower exports.

The finance minister also recently stated that a nominal rupee devaluation of “4 percent-5 percent” may be realistic. “We have incorporated PKR devaluation of around 3-4 percent for the next few years in our macroeconomic forecasts and in our sector/company models,” they added.

Experts at Arif Habib Ltd stated that after months of speculations over reasonable levels of the PKR-USD parity, the rupee underwent a noticeable 3 percent intraday downswing.

Agencies add: The rupee weakened 3.25 percent in trading against the dollar in what analysts speculated could be a central bank-led devaluation to shore up the economy.

The steep drop after a long period of stability prompted speculation that the State Bank - which is the biggest player in the market where it operates a de facto managed float - had allowed a devaluation to occur.

"We believe the devaluation is in response to ongoing external challenges that have seen FX reserves decline by about $4 billion from their peak of $24.5 billion last October," an analyst's note from Citibank said.

Pakistani exporters have long complained that the rupee is overvalued, hurting their competitiveness.

The International Monetary Fund last year pointed out that the currency, which operates under a managed float regime, was overvalued by as much as 20 per cent and was negatively impacting its exports.

In an interview last month, Commerce Minister Khurram Dastgir Khan said he was trying to persuade Finance Minister Ishaq Dar to adjust the rupee’s value after the devaluation of currencies by regional players including China, India, Turkey and Thailand gave them an edge over Pakistan.