KARACHI: The dollar suffered its sharpest daily fall in the inter-bank market this fiscal year, going down by Rs1.20 on Tuesday.
The greenback has now fallen 2 per cent in the last two days, to Rs103.60 from Rs105.50 where it stayed for a month. Dealers fear it would depreciate further in the coming days.
It traded as low as Rs103.60-65 in the inter-bank market on Tuesday, but closed slightly above at Rs103.75. Brokers said it was surprising for them as the US currency had been on the rise since the beginning of the fiscal year.
Currency experts were eager to find reasons behind the new move of the government which has turned the tide for the rupee in the past, bringing it back from Rs109 a dollar to below Rs98.
“At least four banks were selling dollars and the rate was falling without resistance indicating that it was a deliberate move by the government and the State Bank,” said Atif Ahmed, a currency dealer in the inter-bank market.
Analysts said while the independent economists have been shouting that the local currency was overvalued by 10pc to 20pc, the latest move could be shocking for them. Economists argue that due to global recession Pakistan would not be able to compete in the international market with the current exchange rate.
Since the beginning of this fiscal year, the dollar gained more than 4pc against the local currency in the inter-bank market, but the reason was that all major global currencies have lost weight against the greenback. It was observed that amid falling oil prices the dollar remained a single opportunity for global investors having trillions of liquidity which helped the greenback rise.
“Our exports are persistently declining, our share in global markets is decreasing and the country still has a current account deficit in spite of record low oil prices,” said Faisal Mamsa, CEO of Landmark Capital. “When central banks the world over are looking for creative ways to support their economy, we are introducing a new foe. If this was intervention, it was poor judgement.”
“The rupee has strengthened by 2pc over two days and the momentum is still intact. However, it will face a lot of resistance around the 103.50 mark and will likely settle down to a narrow trading range today,” said Eman Khan of Tresmark, an application that tracks markets.
Currency experts, dealers and analysts were on the same page while criticising the sudden appreciation of the local currency amid falling exports. They find it hard for exporters to digest the new move. Exporters have been demanding devaluation of the local currency to make their products competitive on the world market.
Falling oil prices, recession in the European Union and low growth of China have helped the dollar emerge as the strongest currency. It has appreciated this year against all the major currencies, including the euro, Chinese yuan, Japanese yen, Indian rupee and most of the Far Eastern currencies.
Last week, the finance minster and the State Bank warned currency dealers in the open market to cut the dollar’s value by Rs2. The warning produced results as the US currency traded at Rs105.60 on Tuesday against last week’s Rs107.80, losing about Rs2.20 in four days.