Rupee recovers Rs5 vs dollar in open market
PHOTO: FILE
The high drama continued in the open currency market on Tuesday, where the rupee recovered 1.65%, or Rs5, to Rs303 to a dollar as dealers came under pressure to keep the currency overvalued.
In the inter-bank market, however, the rupee maintained its downward trend for the third consecutive working day, falling 0.13%, or Rs0.37, to a new two-week low at Rs286.56 against the greenback. The rupee’s notable recovery in the open market encouraged the gold pricing body to reduce the metal’s price by Rs2,300 to Rs228,100 per tola (11.66 grams) despite a surge in the international market where gold value went up by $24 to $1,964 per ounce (31.10 grams).
Market talk suggests the rupee recouped losses on the back of improved supply of US dollars. Individuals have returned to the retail counters of currency dealers to sell the greenback and other foreign currencies.
On Monday, the short supply of the greenback pulled the rupee down by Rs8 to Rs308/$. Prior to that, the currency made a record recovery of Rs27 to Rs285/$ in intra-day dealings on June 1.
The central bank has continued to shift the open market’s business to the inter-bank market as it wants to reduce the exchange rate gap in the two markets.
The spread contracted Rs5 to around Rs16 on Tuesday compared with Rs21 a day ago. Last week, the spread had widened to record Rs27.
The widening gap also drew the International Monetary Fund’s (IMF) attention, which asked Pakistan’s government to improve the functioning of its currency markets. The lender wants to see a similar exchange rate in both markets.
Latest reports indicating Pakistan will strive to revive the stalled $6.5 billion IMF loan programme before it expires on June 30, 2023 also encouraged individuals to sell their dollar holdings in the open market.
The rupee, however, maintained its downturn in inter-bank dealings after crude prices surged in global markets, driven by Saudi Arabia’s plans to cut oil output. Oil traders in Pakistan arrange import payments from the inter-bank market.
Published in The Express Tribune, June 7th, 2023.
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