By Shahzad Anwar
KARACHI: The rupee fell further against the US dollar in inter-bank market on Wednesday as it closed at a record low of Rs80.70 compared to Rs79.80 a day earlier.
Some bankers even quoted Rs80.95 to a dollar but according to market sources no deal materialised at that level.
It was the third consecutive day when the rupee came under severe pressure as consistent demand from importers and oil companies and short supply was the basic factor for hurting the currency’s position further.
Market sources are of the opinion that in case the same supply position persists, the rupee would find itself under strain in the coming sessions as well. There was some news of State Bank’s intervention but market sources did not confirm it.
Under the present market situation, the rupee seems vulnerable to more falls but there are chances of a possible rebound if dollar supply gets better through SBP intervention or arrival of export proceeds into the monetary system.
Dollar demand has been rising for the last many days but SBP’s intervention on Wednesday last week provided some relief and helped increase overall supply in the market, supporting the currency’s demand. The demand is coming basically from oil companies as well importers.
“It was not that the demand for dollar had come down resulting in some increase and stability in the market but in fact, it was better supply which helped ease pressure from rupee, but as soon as these dollars were sold, pressure has again arrested the national currency,” Syed Nabeel Ahmed at Khanani & Kalia International said.
Some bankers said that physical shortage of dollars was key factor, which needed to be fixed on a permanent basis. Though State Bank of Pakistan is taking necessary steps to control free fall of rupee, it is already finding difficult due to consistent pressure on country’s foreign exchange reserves, foreign exchange inflows are almost on a halt and no immediate financial assistance is coming in.
The market sources said that biggest threat to the market was the supply, which can only be managed if there was a constant inflow on account of remittances, foreign investment, financial assistance and exports. But overall, only the remittances are showing a healthy trend while all other elements are posing serious challenge to the economic managers to manage the entire situation under the present circumstances.
According to the latest statistics from the State Bank, remittances sent home by overseas Pakistanis continued to rise as an amount of $1.88 billion was received in the first quarter (July-September 2008) of the current fiscal year. That represented an increase of $378.61 million or 25.22 per cent when compared with the same period of last fiscal year.
The SBP said that out of the total amount, $0.11 million was received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs). During September 2008, Pakistani workers remitted a record amount of $660.35 million, almost $144.3 million or 27.96 per cent up when compared with $516.05 million sent home in September 2007. The previous highest amount remitted in a single month was recorded in July 2008, when overseas Pakistanis sent $627.21 million.
The dollar started new day at its overnight exchange price of Rs81 for buying on Tuesday and was trading at Rs82 for buying and Rs82.50 for selling till late evening. This indicates another loss of Re1 in rupee value against dollar.
The demand, being the major reason behind rupee’s fall, continued to come in high volumes today as well while physical shortage of dollars further dented rupee’s position. Some of the dealers were quoting even higher rates but market settled between a price range of Rs82.50 and Rs82.70. The physical intervention by State Bank in the form of providing dollars to exchange companies also remained slow which added more fuel to the overall supply position of the market.
Thursday, October 16, 2008