The Pakistani rupee plunged about 8 percent in early trading on Tuesday in an apparent devaluation by the central bank, market participants said, a day after the new government said it would seek an International Monetary Fund (IMF) bailout.
The rupee tumbled to about 134 per dollar by 1030 local time (0530GMT) on Tuesday after closing at 124.26 on Monday.
“The central bank has given an indication to let the rupee go with market forces,” said one market participant at a brokerage. A second market participant confirmed that the central bank is keeping out of the market, effectively letting the currency drop in a de facto devaluation.
The State Bank of Pakistan (SBP) runs what is widely seen as a managed float, though its official stance is that the currency is freely traded.
“The market is aware about the overall macro economic conditions and based on those conditions, they are having their own expectations about the exchange rate, so that is driving (the rupee valuations) currently,” Abid Qamar, the SBP spokesman, told Reuters.
The latest step by the central bank marked the fifth de facto devaluation since December, which has seen the rupee lose over 26 percent of its value, and is in line with the decision to seek IMF support to avoid a balance of payments crisis.