After hitting a new peak on Monday, the US dollar extended its gains against the rupee in the interbank market and rose past the Rs205 mark to reach a new high during the early hours of trading on Tuesday — a trend that is largely attributed to the dollar strengthening in global markets, a dearth of dollar inflows and the central bank's depleting foreign exchange reserves.

       According to the Forex Association of Pakistan (FAP), the greenback appreciated Rs1.70 from the previous day's close of Rs203.90 and climbed to Rs205.50 around 10:30am. (The FAP's closing rate shows a slight deviation from that of the State Bank of Pakistan, which posted a closing rate of Rs203.86).

       Head of research at Tresmark, Komal Mansoor, views the rupee's fall in light of trends in global markets, where the dollar has been gaining ground.

       According to a Reuters report, the US dollar stood by a fresh 20-year peak today and just about everything else nursed losses as investors braced for aggressive Federal Reserve rate hikes and a possible recession.

       “The dollar's strength, on the basis of quantitative tightening, is the key driver in the global markets," Mansoor told Dawn.com. She pointed out that Japan's Yen was at a 24-year-low and other "major and regional currencies are also at multi-year lows".

       "This is playing in the minds of local traders," she explained.

       Saad Bin Naseer, director of web-based financial data and analytics portal Mettis Global, highlighted the stalled $6 billion programme with the International Monetary Fund as another factor contributing to the rupee's fall while the local currency market faces a shortage of the dollar.

       The IMF loan facility has been stalled since early April as negotiations with the international money lender remain inconclusive, with the lender earlier expressing reservations over fuel and energy subsidies introduced by the previous PTI government and now over targets set by the new government for the upcoming fiscal year.

       The IMF's representative in Islamabad, Esther Perez Ruiz, told Reuters a day ago that additional measures would be needed to bring Pakistan's budget for the year 2022-23 in line with the key objectives of its programme with the IMF.

       The rupee was under pressure as the targets set by the government in the budget for the fiscal year 2022-23 were not in line with the IMF's expectations, explained Naseer, adding that "budgetary measures have created uncertainty on the resumption of IMF programme".

       "Until the government is not able to resume the IMF programme, pressure on the rupee will continue," he said.

       Moreover, he added, "the fate of inflows from China [also] remains uncertain".

       "Furthermore, the rupee is also shedding its value in anticipation of the Financial Action Task Force (FATF) meeting, which will review Pakistan’s actions against money laundering and terror financing," he noted.

       Pakistan has been on the FATF's grey list for deficiencies in its counter-terror financing and anti-money laundering regimes since June 2018.

       More to follow