Rupee declines to fresh lows
The Rupee has fallen to a record low, declining by a further six paisas with increased demand for the dollar.
KARACHI:
Rupee fell to a record low on Monday, declining by a further six paisas in the backdrop of a strong demand for the greenback – mostly for import payments. The rupee ended at 86.10/14 to the dollar, against Friday’s close of 86.04/09.
Dealers expect the local currency to weaken further. “The rupee traded at 86.12 in TOM (one-day forward) market,” said another dealer. The rupee lost 0.9 per cent this year, after falling 6.17 per cent in 2009.
President of the Pakistan Foreign Exchange Dealers Association, Malik Bostan said that the current demand for US dollars was natural ahead of the upcoming Hajj season. Furthermore, he said Pakistan was importing agricultural products instead of exporting them after the floods this year, which had also put pressure on the local currency.
However, he said, the State Bank should be ready to intervene if the local currency declines after this natural demand comes to an end, he added.
He further said that demand for dollars was also high after Eid as remittances had declined by 20 per cent. However, Bostan was concerned about the impact of the sensitive political situation on the domestic currency market.
“Businessmen, people and other stakeholders are all shifting towards the greenback mainly because of the rumors in the market regarding the toppling of the government” he said.
Dismissing reports regarding the value of rupee declining to as low as 90 rupees to a dollar, he said that people should not be concerned because the central bank would intervene long before matters worsened.
Anjum Nisar, a prominent importer of consumer products, said that devaluation of rupee was putting additional stress on businessmen as it meant that they were purchasing goods from foreign countries at a higher rate while trying to maintain stable prices for finished goods in Pakistan.
He said that due to this, importers’ profit margins were being squeezed, adding that this situation also would not last for a long time “as the entire economic process is in shambles and businessmen cannot afford to pay out of their own pockets for long”.
Citing the upcoming Hajj season as another major factor affecting the demand for greenback, dealers said that greenback buyers were worried by the continuing decline of the local currency and many of them were converting local currency into dollars well before travelling for Hajj.
Meanwhile, many others were also exchanging their local units for dollars to get a better exchange rate bargain.
However, this trend was only being practiced by either expatriate Pakistanis or who have saved up money in their bank accounts, said Kashif Ali, a banker.
In the money market, overnight rates ended flat at 10 per cent, unchanged from Friday’s close and dealers said the next inflow amounting to Rs8 billion ($93 million) were scheduled for Friday.
Published in The Express Tribune, September 28th, 2010.
Rupee fell to a record low on Monday, declining by a further six paisas in the backdrop of a strong demand for the greenback – mostly for import payments. The rupee ended at 86.10/14 to the dollar, against Friday’s close of 86.04/09.
Dealers expect the local currency to weaken further. “The rupee traded at 86.12 in TOM (one-day forward) market,” said another dealer. The rupee lost 0.9 per cent this year, after falling 6.17 per cent in 2009.
President of the Pakistan Foreign Exchange Dealers Association, Malik Bostan said that the current demand for US dollars was natural ahead of the upcoming Hajj season. Furthermore, he said Pakistan was importing agricultural products instead of exporting them after the floods this year, which had also put pressure on the local currency.
However, he said, the State Bank should be ready to intervene if the local currency declines after this natural demand comes to an end, he added.
He further said that demand for dollars was also high after Eid as remittances had declined by 20 per cent. However, Bostan was concerned about the impact of the sensitive political situation on the domestic currency market.
“Businessmen, people and other stakeholders are all shifting towards the greenback mainly because of the rumors in the market regarding the toppling of the government” he said.
Dismissing reports regarding the value of rupee declining to as low as 90 rupees to a dollar, he said that people should not be concerned because the central bank would intervene long before matters worsened.
Anjum Nisar, a prominent importer of consumer products, said that devaluation of rupee was putting additional stress on businessmen as it meant that they were purchasing goods from foreign countries at a higher rate while trying to maintain stable prices for finished goods in Pakistan.
He said that due to this, importers’ profit margins were being squeezed, adding that this situation also would not last for a long time “as the entire economic process is in shambles and businessmen cannot afford to pay out of their own pockets for long”.
Citing the upcoming Hajj season as another major factor affecting the demand for greenback, dealers said that greenback buyers were worried by the continuing decline of the local currency and many of them were converting local currency into dollars well before travelling for Hajj.
Meanwhile, many others were also exchanging their local units for dollars to get a better exchange rate bargain.
However, this trend was only being practiced by either expatriate Pakistanis or who have saved up money in their bank accounts, said Kashif Ali, a banker.
In the money market, overnight rates ended flat at 10 per cent, unchanged from Friday’s close and dealers said the next inflow amounting to Rs8 billion ($93 million) were scheduled for Friday.
Published in The Express Tribune, September 28th, 2010.