KARACHI: The US dollar jumped by Rs2.30 (2.25 per cent) versus the rupee in the inter-bank market on Monday, with market experts fearing further depreciation in the days to come.
Currency dealers said the dollar, which was being traded at Rs103.90 in the first session, touched Rs104.40 in the second session in the inter-bank market. Its rate was Rs102.10 on Friday.
“The devaluation seems deliberate since the State Bank did not come to rescue a melting rupee,” said Atif Ahmed, a currency dealer in the inter-market market.
The central bank keeps the exchange rate under control with the help of banks, but also eases grip whenever required.
Monday’s was such a vital loss that the open market lost control over the prices and failed to collect correct data. “The open market gets upset with this sudden change in the exchange rate in the inter-bank,” said Malik Bostan, the president of Forex Association of Pakistan (FAP).
“The market witnessed volatility and we were unable to announce the average price of the dollar in the open market,” he said. But he hoped the market would settle on Tuesday.
For the last four weeks, the dollar was being traded at a significant difference in both the markets.
The open market reflected the impact of devaluation in the regional countries. Within a week, the Indian rupee fell to Rs66 per dollar from Rs62. Bangladesh’s taka also depreciated along with other regional currencies like those of China, Indonesia, Malaysia and some Middle Eastern countries.
“The textile lobby, mostly exporters, have been seeking rupee’s devaluation to boost exports,” said a currency dealer in the banks market. “Reports about 12pc fall in July exports also convinced the government to remove the cap over exchange rate.”
In a recent meeting with Finance Minister Ishaq Dar, textile exporters demanded depreciation of the local currency. Since both China and India are competitors of Pakistan in textile exports and both have devalued their currencies, it seems the rupee’s devaluation was made in the wake of pressure mounted by a wave of regional currencies rout.
Currency experts and dealers were unable to assess the sudden rise in the dollar’s price in the inter-bank market. “The most important question is that how long the local currency will continue to fall and what is in the mind of economic managers,” said an analyst.
The government earlier took drastic action against the exchange rate, sending the dollar back to Rs98 from Rs109 during 2013. The step was generally appreciated by common people but was criticised by economists and analysts who saw political gain behind the move.
“Now the rupee has been sent in reverse gear. There is a need to cap it somewhere close to the current price otherwise we can see a sharp increase in dollar rates within a month to touch the September 2013 price of Rs109,” said Ahmed, a currency dealer.