Dollar trades at Rs125 in interbank, $2b coming from China
By S N Syed
KARACHI: Dollar has depreciated by Rs2.81 against Pak rupee in the interbank market and traded at Rs125.05 on Monday, currency market sources said.
The dollar has depreciated by around Rs7 against Pak rupee in the open market after conclusion of peaceful elections.
Significant recovery has been made by rupee against dollar on reports of $2 billion inflows from China and on positive sentiments after smooth transactions of democratic process.
The rupee recovered Rs2.81 to close at Rs125.05 to a dollar in interbank foreign exchange market from last Friday’s close of Rs127.86 in interbank foreign exchange market.
The exchange market witnessed accelerated intraday activity as one point dollar eased to Rs122.50. The panic like situation during intraday trade also disturbed the online trading system of major banks.
Currency dealers said that reports of inflows from $2 billion from China had eased pressure on dollar demand. Experts, however, said that the measures taken by the State Bank of Pakistan (SBP) had started yielding.
They said that the central bank restricted money changers on intercity cash transfer, asking them to use banks. This has meant money changers do not have cash to buy dollars with.
The experts said that border closing with Afghanistan during elections had reduced smuggling which resulted in more availability of dollar in the open market.
They further said with a small fall, investors panicked and are selling the dollar as much as they can, this eases supply and demand pressure and devalues dollar in local market.
In open market buying and selling was recorded at 123.00/126.00.
Before general elections, Pak Rupee had been devalued five times since December 2017 and was down a cumulative 20 percent.
Government had devalued Pak Rupee by five percent on December 8, 2017 to Rs110, 4.5 percent to Rs115 on March 20, 2018 and five percent to Rs121 and around five percent on July 16 to Rs128.5. During the last 10 years, Pak Rupee has devalued annually by around five percent.
Analysts had believed that depreciation was much needed as Pakistan’s external account continues to deteriorate with the external Current Account Deficit (CAD) down during FY18 by higher than expectations.
CAD is now expected to increase to a whopping $18.0 billion (5.8 percent of GDP) in FY18 compared to $12.6 billion (4.1 percent of GDP) previous year.
Sources in the currency market said that due to peaceful elections and majority of a single party at the centre made people sell dollar in the open market that appreciated the rupee price.
The State Bank of Pakistan remained silent on current depreciation of dollar against rupee. He has earlier called the depreciation, “This movement is based on foreign exchange demand-supply gap in the interbank market.”