The Pakistani currency nosedived 1.65% (or Rs4.33) to Rs265.83 against the US dollar in the interbank market at 12:45 pm on Wednesday.
The latest drop follows the International Monetary Fund (IMF) expressing concern with the incumbent government regarding the still-present control of the rupee in the interbank market.
The rupee also took a battering following Moody’s Investors Service anticipating that the country’s risk of default on foreign debt repayment has peaked with little chance of recovery.
Pakistan is in talks with the IMF to revive its $6.5 billion loan programme to avert an imminent default on foreign debt repayment.
The rating agency downgraded the government’s local and foreign credit ratings to Caa3 from Caa1 on Tuesday.
The agency cut the rating for the second time in the past four months on the assessment that the supply of US dollars has dropped significantly in the domestic economy.
Earlier, the local currency had recovered 6.5% (or almost Rs17) to a one-month high of Rs259.92 on Monday.
On Tuesday, it shed 0.60%, or Rs1.58, to close at Rs261.50 against the greenback in the interbank market.
Market reports suggest the value of the rupee in the interbank market should match the one in the black market – currently in the range of Rs285 in Pakistan and Rs295 in Afghanistan.
An expert, however, said the value of the currency may not match as the size of the black money market is significantly smaller compared to the interbank.
The size of the black market is estimated at around $300-350 million a month compared to around $6 billion in the interbank market.