KARACHI, Dawn News – July 9: Rupee depreciated by 5.86 per cent against the US dollar in fiscal year 2013 as compared to 9.7pc fall recorded in the previous year.
The State Bank reported that rupee lost 4.4pc in value against the US dollar during July-April 2013.
However, last week’s jolt pushed the dollar above Rs100 depreciating the local currency by 5.8 6pc in a year.
During the first week of July, dollar was traded at more than Rs100 in the inter-bank market while in the open market, it was traded at Rs101.50
The depreciation of local currency was higher in FY-12 when dollar gained 9.7pc against the local currency.
Currency experts said that the situation may improve with the loan agreement with the IMF. However, they were not sure if the rupee would gain to get back its earlier position.
“We can see some fluctuation in the exchange rate that may bring dollar below Rs100, but market believes it would settle above Rs100,” said Atif Ahmed, a currency dealer in the inter-bank market.
So far, there is no change in the sharply falling foreign exchange reserves which is the root cause of uncertainty in the market.
Importers do not believe that dollar would be available at this rate in the coming weeks or months which have increased the forward rates.
“We don’t see any benefit of rupee devaluation for exporters despite the fact they have got more money in return of export proceeds,” said Aamir Aziz, an exporter of textile based made-ups.
He said inflation has increased the cost of production while buyers got the advantage of rupee devaluation.
Since June 2008, rupee depreciated by 48pc against the US dollar till June 2013, leaving little hope for recovery of the currency in near future.
Currency dealers said that sustainability of the exchange rate which means if the local currency remains at the same level against the US dollar for a year, will greatly improve the situation.
The country witnessed single digit low inflation during FY-13 after a prolonged double-digit inflation which vastly reduced the purchasing power of the currency.
Some analysts believe that rupee would be further devalued since IMF still believes the local currency is over-valued against the US dollar.
In case of loan agreement with the IMF, there is a possibility of local currency’s devaluation in the next three months. Finalisation of an agreement with the IMF is possible in September.