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Dollar’s upward march vs. Pakistan rupee continues

By Mushfiq Ahmad

KARACHI: The dollar’s upward march against the rupee continued on Saturday, as it gained 20-25 paisas despite little trade.

According to dealers, dollar closed at Rs 82.30 for buying and Rs 82.35 for selling in the interbank market, while it had closed at Rs 82.10 for buying on Friday.

A banker said there was import demand, which put pressure on the local currency.

Another banker said there was speculation in the market that the release of the next tranche of the International Monetary Fund (IMF) loan might be delayed. “This could have been one of the reasons why the rupee lost its value,” he added.

If a delay in release of IMF’s loan tranche causes the rupee to lose value, it will belie the claim of the government that macroeconomic situation has been stabilised after entering into the IMF programme. It will show that the government is still depending heavily on foreign inflows to meet its trade and current account deficits.

This pressure on rupee is surprising because overseas Pakistanis sent a record $7.8 billion back home during the last financial year. This was significantly higher than $7.5 billion that the government and the central bank had expected.

After remaining stable for about seven to eight months, the rupee-dollar parity has once again become unstable. The domestic currency is gradually losing value against the dollar. In 2008, the domestic unit had lost some 32 percent against the US currency because of high trade and current account deficits and speculative investment in dollar.

The dollar had surged as high as Rs 87 in the open currency market and gone up to about Rs 83 in the interbank market during the last quarter of 2008. It had stabilised only after the government obtained a $7.6 billion loan from the IMF under a stand-by agreement.

Open market: In the open currency market, the dollar was selling at Rs 82.10, 20 paisas higher than previous session’s level of Rs 81.90. It was, however, still 20 paisas lower than Thursday’s level of Rs 82.30 when it had increased very sharply.

It looks like speculation has once again started in the open currency market following several months of calm and stability. State Bank had imposed tighter controls on the functioning of foreign exchange companies following last year’s sharp surge in dollar’s value. Investigation had also led to arrest of a number of people reportedly involved in sending foreign currency abroad.

There had been a report last year, according to which foreign currency was being smuggled from Peshawer to Afghanistan. Dealers were selling dollar at extraordinarily higher rates in Peshawer at that time.

Daily Times, 12-JUL-09

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