Rupee weakens to over Rs119 against dollar in open market as panic buying continues

Dealers’ association convenes meeting, says rate will now be determined three times a day

KARACHI: The open market continued to remain in the grip of panic buying as the currency weakened to as much as Rs119.5 against the US dollar, two days after the central bank held an “emergency meeting” with dealers to keep the gap with the inter-bank rate as low as possible.

Overheating of the US dollar forced currency dealers on Wednesday to grab a chair and table to chalk out a way forward in a bid to meet objectives of the State Bank of Pakistan (SBP). The foreign currency dealers’ association reported that the rupee hit a new intra-day high of Rs119.50 on Wednesday. It closed at Rs119.30, according to forex.pk.

In the attempt to tackle the ongoing slide in the rupee, the foreign currency dealers’ representative body, the Forex Association of Pakistan, has said in a press statement that it has decided to sell the dollar at a fixed price to be determined three times (10am, 12pm and 4pm) on each day.



The pricing mechanism may help currency dealers implement the SBP directives of narrowing down the gap, which has currently gone beyond 3.2%.

Accordingly, they have determined the first fixed price of the dollar of Rs118.70, which would remain applicable till the association announces a new one at 10am on Thursday.

“The fixed dollar price would be determined keeping in view the demand and supply mechanism of the dollar (at open market),” it said.

The association’s president Malik Bostan, who chaired the meeting, said those currency dealers who choose to sell dollars at their own prices would be punished with a penalty of Rs100,000 for violating the new rule.

If a currency dealer violates the rule for the second time, it would be charged Rs200,000. An amount of Rs500,000 would be charged for a third-time violation. “If any dealer is found violating the rule for the fourth time then the complaint would be lodged with the SBP … all members have developed consensus upon the decision,” he said.

Bostan said he briefed SBP Executive Director Syed Irfan Ali Shah regarding the widening gap between rising demand and shrinking supply of the dollars in the open market before convening the dealers’ meeting.



“We can control the price if the SBP (additionally) pumps dollars into the open market,” he said. Dealers said demand has continued to increase on assumption that the government would opt for a third round of rupee devaluation.

The SBP has already devalued the rupee by over 9.5% in the last four months.

Speculative buying has, however, continued despite Adviser to Prime Minister on Finance Miftah Ismail categorically stating that the government was done devaluing the rupee, as the currency had found its equilibrium.

Published in The Express Tribune, April 26^th, 2018.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.