KARACHI: The US dollar seems to have settled at Rs102 as neither the State Bank nor the Ministry of Finance is making any effort to bring it down through intervention.
For the last ten days, the dollar is pegged at the same level that suits to exporters’ interest. They stopped sending home export proceeds to get benefit of political turmoil which weakened the local currency.
Political uncertainty generated by the sit-ins of PAT and PTI in Islamabad demanding prime minister’s resignation wreaked havoc in the currency market, prompting the greenback to move from Rs98 to Rs103.30.
But things now seem to have settled. “Now there is no panic, no extra demand for dollars. The US currency has settled at Rs102 without intervention from the central bank,” said Atif Ahmed, a currency dealer in the inter-bank market.
Against the backdrop of dwindling foreign exchange reserves, it is difficult for the government to bring the dollar back at Rs98.
Exporters, who are the biggest drivers of foreign exchange, have been agitating against the rupee’s appreciation in the second half of the previous fiscal year, but the finance minister was determined to bring back the US currency to below Rs100.
Bankers said the situation has changed now as the government is facing two challenges simultaneously: sit-ins and flash floods. It is better to persuade exporters instead of pumping dollars in the market at a point when the reserves of private banks have also started falling.
Due to repayments of loans to the International Monetary Fund and other donors, SBP-held reserves fell to $8.718bn from $9. 277bn during August. The reserves of private banks had been stable at $5.043 since June 2014, but fell to $4.859bn at the end of August.
The open market witnessed slightly higher demand due to Hajj season. Currency dealers said the market would be dull after Sept 30 when last flight for Hajj will depart.
“I believe the dollar price will come down due to low demand,” said Anwar Jamal, a currency dealer in the open market. However, he said the open market reflects the prices in the inter-bank market where the dollar is still hot.