State Bank blamed by Dar for ‘artificial’ rupee plunge
Just a day after the value of the rupee had sharply depreciated against the dollar, which created a crisis in the financial markets; The Minister of Finance Ishaq Dar has denounced it as an “artificial” move. He also promised an inquiry after the appointment of a permanent central bank governor immediately.
Mr Dar told the media after chairing an emergency meeting of the presidents of domestic banks and financial institutions that the sudden increase in dollar value had been caused by a “communication gap” within and without the State Bank of Pakistan (SBP).
On Wednesday, 5th July 2017, in the opening hours of interbank trade, the rupee had plunged 3.1 percent, it was the largest single drop in the rupee’s value in nine years.
A shortage of dollar was caused in the open market as the dealers had preferred to hold the foreign currency rather than sell it.
On Tuesday, the value of the Dollar was Rs104.9 and on Wednesday it rose to Rs108.50, before settling at Rs108.25 by close day. However, on Thursday the value had came down to Rs105.5.
For nearly two years, the rupee had been stable, and the unexpected tumble on Wednesday, had caught top government officials, including Dar, off guard.
According to the analysts by not intervening to prop it as it usually does the State Bank had effectively devalued the rupee.
According to the traders the SBP controls the thinly traded rupee market which works as a managed float, however on Wednesday the bank backed a weaker rupee, saying it would ease balance of payments pressures in the $300 billion economy.
The central bank in a statement on Wednesdays said that supporting the rupee depreciation, “SBP also believes that the current exchange rate is broadly aligned with the economic fundamentals.”
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