A currency dealer counts Pakistani rupees and U.S. dollars at his shop in Karachi. PHOTO: REUTERS
They said the return of stability to rupee-dollar exchange rate in the inter-bank market, which was strictly followed to determine buy and sell rates of the dollar and other major foreign currencies in the open market, has helped the rupee to regain some of its strength.
Foreign exchange: SBP's reserves dip 1.4%, stand at $11.7b
The rupee remained stable at Rs121.54 to the US dollar in inter-bank trade on Thursday. It has stood at the same level for about a week. Earlier, it had weakened 15.2% over the past six months.
“In addition to stability in the inter-bank market, expectation of notable inflows of dollars under the amnesty scheme has eased the pressure and provided the local currency with much-needed support to partially regain its strength,” Pakistan Forex Association President Malik Bostan said while talking to The Express Tribune.
The Federal Board of Revenue (FBR) has estimated the receipt of up to $4 billion in the country’s foreign currency reserves under the amnesty scheme that is expiring on Saturday (June 30). The scheme has offered resident and overseas Pakistanis to declare their hidden assets by paying a nominal tax of 2-5% of the assets value.
The exchange rate stability forced people to sell dollars at the current rate of around Rs123. The sellers also included those who were earlier expecting further strengthening of the dollar and had held back its sale.
“Dollar supply to currency dealers has increased roughly 20%,” Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha said.
“The increase in supply is the outcome of a 10% drop in buying and another 10% increase in sales at counters.”
The rupee touched a record intra-day high of Rs123 to the dollar in the inter-bank market in the middle of current month. Speculative pressures had indicated that the currency would settle around Rs125, but it did not happen.
In the open market too, the rupee hit an all-time intra-day high of Rs125.50 to the greenback at that time. It closed at Rs125 for a couple of days, but later appreciated to Rs124.50. In the past three days, it further strengthened and closed at Rs123.80 on Thursday.
The massive drop of over 15% in the rupee’s value in inter-bank trade came in the wake of a worsening current account deficit and balance of payments crisis, which pushed down Pakistan’s foreign currency reserves to a critically low level of $9.66 billion on June 22, 2018.
Rupee weakens to record low as dollar flow slows down
Dealers added that the rupee’s recovery may also be the result of no immediate import payments and debt repayments these days.
Several dealers also linked the recovery with year-end closing on June 30. They said the corporate sector needed to make their books well maintained as per prevailing corporate governance regulations that was why those who had made short-term dollar investments were selling the greenback these days.
Published in The Express Tribune, June 29th, 2018.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ