The currency, whose rate is set by the central bank, dropped as much as 5.3% to 128 per dollar at the close, according to State Bank of Pakistan data compiled by Bloomberg.
The rupee is the worst performer in Asia this year, according to a basket of 13 currencies compiled by Bloomberg.
A spokesman for the central bank declined to comment, though the regulator has previously said the rupee’s level is determined by market forces.
While the global backdrop is worsening for many emerging economies, Pakistan’s own weaknesses, including a widening current-account deficit and the lowest foreign reserves in three and a half years, have brought additional pressure on the $305bn economy, raising the likelihood that the country will seek support from the International Monetary Fund.
The sell-off in emerging market currencies and stocks is likely to continue in the second half of 2018 as the US raises interest rates and the world braces for a trade war, according to a Bloomberg survey published last week.
The Pakistani rupee has dropped almost 14% this year, followed by the Indian rupee’s 6.9% loss.
That still pales next to the Argentine peso’s 32% depreciation, a rout that led the IMF to approve a $50bn loan for the country last month, the biggest in the fund’s history, and the Turkish lira’s 22% retreat.
The benchmark KSE100 Index fell 1.5% as the currency devaluation “has reignited a concern over the macro situation of Pakistan,” said Faisal Bilwani, head of international sales at Alfalah Securities Pvt in Karachi.
“You are not able to stop the foreign exchange bleeding right now,” said Mohammed Ali Hussain, senior analyst in Dubai at Frontier Investment Management Partners Ltd, which handles $2bn in assets. “Until and unless you can bolster your reserves, the quick and dirty fix is a devaluation.”
Pakistan’s economic growth may slow this year for the first time in six years, dropping to 5.2%, with an expected scaling down of expenses, according to a Bloomberg survey.
The nation’s economy in the last fiscal year grew at the fastest pace in more than a decade, with China financing of about $60bn in infrastructure projects.
The devaluation follows a 100 basis-point rate increase Saturday, the most since 2008, as the central bank attempts to suppress demand.
The economy is “overheating,” State Bank of Pakistan governor Tariq Bajwa said in a briefing.
There needs to be a balance “between stabilisation and growth.”
Pakistan’s real reserves have dropped below the level reached when the country approached IMF the last two times for a bailout, according to Bilal Khan, a senior economist at Standard Chartered Bank Plc. With elections scheduled for July 25, the next government will need to approach the IMF as a “matter of urgency,” said Khan.
“It’s a smart move so they can get some extra space’’ before entering negotiations with the IMF, said Mattias Martinsson, a money manager overseeing $420mn of assets at Stockholm-based Tundra Fonder.
Pakistan has been getting “a billion or $2bn from China from time to time, but what they need is some kind of bazooka to show that they have spare capacity for two years.’’
