Rupee hits 5-week high below Rs295/$
PHOTO: AFP
Backed by improvement in foreign currency inflows through official channels, Pakistani currency recovered and stood below Rs295 to a dollar for the first time in five weeks, rationalising the cost of imports compared to significantly higher costs in the recent past.
The rupee advanced its powerful rally for the 10th successive working day as it regained 0.36%, or Rs1.05, and closed at Rs294.90 against the greenback on Tuesday, according to the State Bank of Pakistan’s (SBP) data.
The currency has cumulatively recovered 4.13% of its value, or Rs12.20, in 10 days.
Earlier, it lost 6%, or Rs18.60, to a record low at Rs307.10/$ in the first three weeks of the caretaker government – from August 15 to September 5. It gave an impression that the devaluation had been overdue for some time. The previous Pakistan Democratic Movement (PDM) government had left the job for the interim government.
However, the caretaker government, with the support of the top military leadership, initiated a crackdown on foreign currency smugglers and hoarders. The strict action diverted the flow of foreign currencies to official channels, propping up the rupee significantly.
Market talk suggests that exporters are selling their dollar holdings in the market to avoid exchange rate losses in the short run. Apart from that, the inflow of workers’ remittances through banking channels and the authorised exchange companies has picked up pace, outpacing the demand from importers.
In the open market too, the currency recovered 0.33%, or Rs1, and closed at Rs296/$.
In the past 11 working days, the currency has appreciated almost 11%, or Rs32, in retail trade, narrowing the difference between the two markets to a nominal 0.37%, or Rs1.1, compared to the record high of 10%, or Rs30, about two weeks ago.
The gap had widened due to smuggling and the alleged involvement of some exchange companies. The central bank has suspended licences of a few companies on the charges of flouting the existing rules.
Exchange Companies Association of Pakistan (ECAP) President Malik Bostan, however, quashed rumours that exchange companies were being closed down because commercial banks had been encouraged to set up full-fledged currency exchange companies to meet foreign currency requirements of people.
He revealed that high-level officials informed him that there was increasing pressure on them to shut exchange companies after they were allegedly found involved in currency smuggling.
Bostan stressed that he replied to them that the rupee had lost value in the recent past owing to the re-emergence of Hawala-Hundi operators and the government rightly destroyed their network.
He said that he assured the government that the legal exchange companies stood with it, adding that “if any exchange company is found involved in smuggling, the government should take action against it.”
According to Bostan, exchange companies are supplying almost $15 million to the inter-bank market every day to help increase foreign currency flows. The supply is expected to be enhanced to $20 million per day soon.
“We are confident we will be able to surrender a total of $400 million in the inter-bank market this month,” he said.
Published in The Express Tribune, September 20th, 2023.
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