KARACHI: The US dollar rose to a six-month high on Friday at Rs103.45, crossing the barrier set by the central bank.
“The dollar was below or around Rs103 since March,” said Atif Ahmed, a currency dealer in the inter-bank market. “But pressure mounted on the market on Friday that pushed up the greenback to cross the level.”
Although the dollar slipped slightly below Rs103 in the second half, most of the trading was done at Rs103.20.
Eman Khan of Aerari, an application which tracks market rates, believed that the price action was purely based on strong demand for dollars. “There was an oil payment which stretched the rupee and the situation eased as soon as the payment was covered.”
Dollar’s demand from importers has been rising, but the State Bank was defending the value of rupee.
Prices of all commodities including oil and its by-products have declined sharply in the last three months. Crude oil, which was $112 per barrel in the beginning of this fiscal year, has now slumped to around $81 per barrel. The fall has influenced the entire international market, particularly the oil by-products which have declined between 25 and 30 per cent in the last three months.
“The importers who bought costly products during the three months are now trying to average out the cost by importing cheaper products available in the market. It created extra pressure for dollar demand,” said Anwar Jamal, a currency expert.
Bankers said the local currency is overvalued against the US dollar. It may see a sharp devaluation if the central bank stops influencing the market.
Since March this year, the dollar started depreciating against the local currency and touched as low as Rs97, but then settled below Rs100 for a longer period. However, with the beginning of new fiscal year and political agitation in the country, the situation turned in favour of the greenback.
Moreover, the inflows including foreign investments fell to their lowest level resulting into a drop in foreign exchange reserves.
“With global oil prices at multi-year lows, along with inflows from the IMF and privatisation expected, the rupee looks to be range-bound in the short term,” said Faisal Mamsa of Landmark Capital. “However, there was a temporary spike in USD/PKR around midday as importers desperately bought dollars amid thin supply.”