The rupee’s average rate this year, according to Fitch, is now 164 to the US dollar, up from 158 before. Fitch now forecasts an average rate of 180 for 2022, up from 165 before.
Fitch Sees US dollar will attain Rs180 in 2022.
“We anticipate the currency to fall further as Pakistan’s terms of trade deteriorate, US monetary policy tightens, and US dollars flow out of Pakistan and into Afghanistan,” it added.
The Pakistani rupee has been sliding steadily since May. It was at 170.50 to the dollar on Thursday, more than 10% weaker than its peak in May of 150.95.
Analysts say the rupee has been hit by consistently high demand for dollars due to the country’s current account deficit while the Afghan situation is increasing pressure.
Pakistan’s Stock Exchange also fell nearly 3% this week on fears that a bill moved in the US Senate seeking to impose sanctions on the Taliban that could potentially extend to Pakistan.
Over the long term, tightening US monetary policy alongside higher structural inflation relative to the United States would weaken the rupee against the dollar, Fitch said.
It said, however, that the undervaluation of the Pakistani rupee on a real effective exchange rate basis would limit excessive weakness in the currency.