Rupee recovers Rs7 vs dollar in open market

It comes after banks provide $5m to currency dealers

Our Correspondent June 14, 2023
File Photo (AFP)


Pakistani currency maintained its losing streak for the third consecutive working day on Tuesday amid mounting debt repayment pressure in June, the last month of current fiscal year.

Analysts projected a sharp devaluation of the currency if the expected loan rollover and refinancing was delayed. The currency dropped 0.12%, or Rs0.34, to a three-week low at Rs287.97 against the US dollar in the inter-bank market.

In the open market, however, the currency sharply recovered by 2.34%, or Rs7, to Rs298/$ as the government tightened its monitoring of the currency dealers.

Talking to The Express Tribune, Taurus Securities Director Research Mustafa Mustansir said “our projection for the rupee devaluing to Rs295/$ (in the inter-bank market) by the end of June 2023 remains unchanged.”

“In the best case scenario, the rupee will be somewhere between Rs290 and Rs295 to a dollar by the end of June.” The rupee had hit an all-time low at Rs299/$ in the inter-bank market on May 11, 2023.

He, however, feared a sharp devaluation of the currency in the next two weeks when the government would be repaying foreign loans of $3.6 billion before the end of June.

State Bank of Pakistan (SBP) Governor Jameel Ahmad, in a statement the other day, said that Pakistan was due to pay a total of $3.6 billion in June.

It has already paid $400 million and is due to repay another $900 million in the month. Around $2.3 billion is expected to be rolled over.

“If the rollover is delayed, it will mount pressure on the rupee amid fast depleting foreign exchange reserves,” Mustansir said. The reserves have dropped to $3.9 billion.

Exchange Companies Association of Pakistan President Malik Bostan said in a video message to the media that the sharp appreciation of the rupee by Rs7 against the dollar in the open market came after “commercial banks supplied $5 million to currency dealers on the central bank’s directive.”

Consequently, the gap between rupee-dollar exchange rates in inter-bank and open markets reduced to Rs10 compared to a record high of Rs27 about two weeks ago.

“The exchange rate is highly expected to drop to Rs295/$ tomorrow (Wednesday),” he said. “The government and currency dealers want to reduce the spread to 1-2% (Rs3-5) through policy initiatives very soon.”

The dollars provided by commercial banks actually belonged to the currency dealers as banks had withheld supplies earlier.

“Commercial banks are expected to release another $5 million to currency dealers tomorrow (Wednesday),” Bostan said.

Taking cue from the open currency market, the gold price sharply decreased by around 2%, or Rs4,000, to a six-week low at Rs221,500 per tola (11.66 grams). The drop in bullion price came after the rupee recovered 2.34%, or Rs7, to Rs298 to a dollar in the open market.

Market talk suggests that the gold pricing body considers the exchange rate prevailing in the open market for calculating the price of the metal.

Besides, gold slid $2 to $1,961 per ounce in the international market.

Published in The Express Tribune, June 14th, 2023.

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