What could be done to avoid this free fall? Like what is the currency dependent on? Imports, exports, foreign reserves?
To control this nose down attitude, first and the foremost thing is to control unrestricted import of items. As a next step flight of dollars out of Pakistan has to be checked. Foreign remittances need to be monitored and hoarding be controlled. State Bank has to say no to federal government for any further loans. It also has to put a stop to over printing of currency.
Principally speaking currency notes in circulation have to be according to gold. This would correlate paper with tangible product. However, US managed to get gold related currency with linkage to dollar, which was inturn linked to gold. Later some countries delinked its currency from dollar and started its valuation with forex reserve available in the country. In such scenario printing of extra currency notes, devalues the currency against other currencies. Pakistans forex are unstable since long and depleting fast. It would be rather more appropriate to say that those are already consumed, what we see is forex in transition giving a false forex position.
Present down fall of rupee against dollar is also due to Hajj season where demand for foreign exchange increased and principle of supply and demand came into action taking the price of dollar high.
In present case you can smell the rat, as State Bank bought at 111 to a dollar. Just after that Central Bank intervened and brought dollar back to 105. Where is that extra 5% gone from State Bank and who has been benefited.
Last but least each time State Bank buys from the market to meet IMF repayment schedule price will go up and not return.
As a nation we all have to act responsibly and see how far in our activities we can save flight of foreign exchange. These politician will never do that, they are here to spend not to save. But if majority of this country stop spending on foreign item and reduce the demand of imported products, it will help in reducing trade deficit. Major portion of this deficit is due to oil import. If people work out concepts of vehicle sharing and reducing use of fuel by avoiding the avoidable. Situation will improve.
I am also of the opinion that our 25% or more fuel is wasted, due to our poor traffic sense and violation of traffic rules. By ensuring clear roads, orderly flow of traffic and abiding by traffic rules at least 25% of overall fuel cost can be reduced. This is altogether a different topic so would leave any further details.
Likewise there as so many little things which we can do to support our ailing economy and falling currency.