KARACHI: Pressure is mounting on exchange rate as the US dollar crossed Rs102 in the open market on Thursday after three months.
In the inter-bank market, the greenback was just below Rs102.
The country’s rising foreign exchange reserves, which touched as high as $16bn this week, have failed to stop the devaluation of the local currency.
Currency dealers and analysts said weak economy was the major reason behind the descent of the rupee.
The dollar was traded at Rs101.95 in the inter-bank market and it could touch Rs102 in the next sessions.
Currency dealers in the banks said the devaluation was not because of high demand; it was a gradual loss and was not by design.
“Dollar traded at Rs102.15 on Thursday in the open market which was the highest in this calendar year. But there is no panic of higher demand,” said Malik Bostan, the president of Forex Association of Pakistan.
He said the rupee came under pressure due to rising trade deficit which negated the positive impact of high foreign exchange reserves. “Exporters are demanding higher value for the dollar and the government have allowed it for higher exports.”
Analysts said the increasing imports were the real culprit for the devaluation of the local currency. They said $16bn forex reserves looks attractive but most of the dollars are borrowed and would be paid back while the size of repayment (debt-servicing) is also rising. Last year, the country paid $7bn as debt-servicing.
The $16bn reserves opened the country’s option to borrow another $2bn from the World Bank which may increase reserves further.
A currency dealer in the inter-bank market said the dollar’s appreciation is a global factor since the greenback has been gaining against almost all currencies in the international market. The recent rise therefore should be seen against the backdrop of global currency movements, he said.
However, some experts said weak local currency also reflects low economic growth rate which has not been picking up pace, while the fiscal imbalances are clearly against the target set by the government.
“In the open market the US currency could get more strength in the next few months unless Pakistan receives more dollars through sale of its assets like government’s stake in Habib Bank Ltd,” said Anwar Jamal, a leading currency dealer and expert.
Since last week of December, the greenback has gained Rs1.60 against the local currency, he said.