Lahore – The local currency is once again losing position, with the rupee shedding at least Re1 against dollar just in one week mainly due to gold smuggling from Dubai, eating up around $5 million daily, forex industry experts said on Thursday.
Around 125kg of gold is being smuggled to different big cities of the country from UAE through Dubai flights and to fulfill such a huge demand almost $5 million is being pulled out from Pakistan open market, claimed Forex Association of Pakistan Chairman Malik Bostan.
While Talking to The Nation, he said that his association has conveyed to the State Bank of Pakistan (SBP) for interference to stabilise the local currency. He said that presently around $4-5 million dollar is supplied to local market on daily basis which is enough for local market but following significant cut in gold rates in global market, the demand of gold has increased sharply.
Presently, there is more than Rs2000 difference between the rate of gold in Pakistan and Dubai, causing swift demand of dollar in the country, he said. Bostan asked the government agencies to take action against gold smugglers, who are not only responsible for the depreciation of rupee but also evading taxes of millions of rupees.
Experts said that the rupee will continue to keep its historic downward journey against the dollar on the back of different reasons. “The rupee once again retreated and gave up the firm trend. It failed to resist and traded under severe pressure against dollar amid high demand from the gold importers and less than required supply from the banks,” they said.
The week saw the rupee plunging to a historic low of Rs107.45 on the open against the US currency. The official and unofficial commentators tend to attribute this record depreciation to a widened gap in a natural demand and supply of the greenback, specially on the kerb market. Money market experts said that after the 15 months of stability, rupee has finally started to feel pressure as stronger US dollar has triggered the world and regional currencies depreciation. As a result, rupee has depreciated by 1 percent in open market in November 2016, though stable in interbank.
Experts said that Trump phobia is the major reason of dollar outflow, jolting simultaneously the PSX and the rupee. However, this depreciation of rupee is still lower than the depreciation in Indian rupee (-2.6%), Bangladeshi taka (-1.2%), Indonesia rupiah (-3.2%), Thai baht (-1.3%) and Malaysian ringgit (-4.7%).
Experts cannot rule out of 3-5 percent currency depreciation, as SBP’s dollar injections may not be helpful in cooling down US dollar rate which is hovering above PKR107 in the open market compared to interbank rate of Rs105.8/USD. However, they do not expect sharp rupee depreciation as feared by International Monetary Fund (IMF) (5-20%) owing to strong dollar debt/investments inflows. Rupee depreciation is considered negative for the overall market, but this time, it may relieve investors as the already due moderate depreciation (3-5%) would improve investors’ confidence (specially of foreign investors), who are shying away from the country’s market fearing the uncertain fate of the local currency. To recall, SBP has been actively supporting local currency through regular USD injection, while the restored confidence of investors on country economic outlook and strong dollar inflows also helped in previous months.
The currency market has fluctuated regularly in recent months with hefty rises and falls on some occasions. In the long run, however, the rupee has stood firm after experiencing extensive volatility, when it weakened from around Rs98 to a dollar to above Rs103 in the wake of political impasse over alleged election rigging. Earlier, the rupee remained glued to the Rs98 level for months, recovering from the historic low of Rs110. It came under pressure following heavy debt repayments to the IMF and other creditors, which ate into the central bank’s foreign currency reserves.