In a U-turn, rupee dives in open market

Depreciates Rs8 to four-day low at Rs308 vs dollar

KARACHI:

Pakistani currency on Monday again took a dramatic U-turn, diving 2.59%, or Rs8, to a four-day low at Rs308 against the US dollar in the open market amid short supply of the greenback on retail counters.

In the inter-bank market, the currency dropped to a two-week low at Rs286.19 against the greenback, losing 0.18%, or Rs0.51.

In the open market, the currency had appreciated 9.47%, or Rs27, to Rs285/$ on June 1 but closed at Rs299/$, though many dealers reported shortage of the dollar.

The currency recovered after the central bank allowed commercial banks to buy dollars from the inter-bank market, instead of the open market, to settle international payments made through credit cards by their clients.

Talking to The Express Tribune, Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha said the supply of the US dollar to currency dealers was shrinking.

“Either people are holding dollars on assumption the increase was temporary and the local currency will crumble again or are selling them in the illegal Hundi-Hawala market where the exchange rate hovers around Rs320/$.” He said the government’s contradictory policies were fueling people’s interest in the illegal currency market.

“Most of the imports on (the so-called) deferred payment are done through the Hundi-Hawala system, otherwise, who will supply goods on such a long deferred payment,” he asked. He was referring to the government’s recent request to businesses to import raw material on one-year deferred payments.

Paracha pointed out that exchange companies were being blamed for running the illegal market but banks were found involved in manipulating the exchange rate.

The ECAP general secretary said the government’s policies had shifted most of the rupee-dollar exchange business from the open to inter-bank market. In its last move, it allowed banks to buy dollars from the inter-bank market to settle credit card payments.

Published in The Express Tribune, June 6^th, 2023.

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