KARACHI: The State Bank of Pakistan (SBP) continues influencing the market to keep the dollar below Rs102.
Dealers in the inter-bank market believe that the currency rate will readjust, if the SBP allows the market to determine the exchange rate independently.
They said that the SBP had been monitoring every transaction critically and enforcing regulations strictly.
In the first half of this fiscal year, the rupee lost about 1.9 per cent against the greenback and this change occurred slowly despite monitoring by the bank.
During the current week, the dollar reached close to Rs102, but was restricted to Rs101.95, after banks were told to stop dealing at Rs102.
On Thursday, the dollar was traded at Rs101.83. It changed hands at Rs101.95 in the beginning of the week and then at Rs101.93 in the middle of this week, reflecting an increased pressure on banks dealing in the currency business.
However, the open market broke the barrier despite comfortable supply of dollars in the market. The open market has been following the path of banks’ rates for more than six months but it deviated from its path and crossed the barrier of Rs102.
“State Bank has been artificially holding the dollar back, not letting it cross the Rs102 mark. We don’t want to speculate the next possible price, but expect dollar to cross Rs102 within no time if SBP stops influencing the market,” said a currency dealer in the inter-bank market.
The government has been credited for bringing the dollar back from Rs110 to Rs98 during its tenure which was widely appreciated by economists and stakeholders of the economy, except exporters.
The finance minister took the pride in bringing the dollar to Rs97 to Rs98, but recent depreciation may be harder to control.
“Exporters were against speedy appreciation of local currency from Rs110 to Rs98 which resulted in huge losses to them as they got less price for dollars they earned in the country,” said Atif Ahmed, a currency dealer in the inter-bank market.
Currency experts said it was not the rupee depreciation; in fact, the dollar has been gaining against all major currencies since the beginning of 2014. It also gained against rupee.
Dollar gained against almost all currencies in 2014 while its grip over currency movement is still strong, controlling major share in the global currency market.
The sharp fall in oil prices, with declining gold prices, forced major investors to park their liquidity in the dollar.
Currency dealers in the banking market said that even high reserves of about $16bn of the country could not infuse strength to the exchange rate in favour of local currency.
Experts see higher exports and lesser imports to bridge the ever increasing trade gap which could protect the local currency from mounting pressure of dollar.
Pakistan’s foreign exchange reserves are mostly borrowed while annual debt servicing for foreign debts in FY14 was about $7bn. This is a shocking figure for a country which could hardly accumulate $16bn through IMF, World Bank, selling eurobonds and Islamic bonds.
Recently the prime minster said exports should touch $50bn; however, he did not give any strategy for this mammoth growth.