KARACHI: The Pakistani currency continued its downward spiral in search for a possible bottom in the open market as it dropped a fresh one-rupee to 143.70 to the US dollar on Monday as the gap between demand and supply of foreign currencies widened significantly.
The rupee also hit an intra-day low of 145 to the greenback. The rupee weakened in the open market despite remaining stable at 141.39 to the greenback in the inter-bank market during the day, the State Bank of Pakistan (SBP) reported.
The inter-bank market has continued to hover around current levels for the past around one month.
“The demand for foreign currencies, especially the US dollar, has doubled while their supply has shrunk to zero in the open market on rumours that Pakistan had agreed to let the rupee depreciate up to 165-170 to the greenback under the IMF loan programme,” Exchange Companies Association of Pakistan (ECAP) Secretary General Zafar Paracha told The Express Tribune.
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People, who were supposed to buy dollars a week or month later, are trying to purchase them now while potential sellers delayed the exchange of foreign currencies in anticipation of further rupee depreciation.
Individuals remained the only source of foreign currency supply and demand in the open market, which is relatively a small market compared to the inter-bank. Individuals buy foreign currencies to pay fee of foreign schools and universities, pay bills of hospitals and bear expenditures during Hajj and Umrah.
On the other hand, the foreign currency sellers include recipients of foreign currencies from their family members and friends coming from abroad to spend annual vacations in the country and freelance IT software exporters.
Forex Association of Pakistan President Malik Bostan said they were constantly in contact with the SBP to keep it updated on the emerging situation in the open market.
“The central bank has dismissed the rumours that the country has agreed to let the rupee depreciate to a certain level,” he said. “But yes, the government has agreed with the IMF to let market forces decide rupee-dollar exchange parity going forward.”
He said the rupee continued its downward trajectory on statements by some analysts and economists that the currency would further weaken against the dollar under the 39-month IMF loan programme worth $6 billion. He said rumours proved baseless as the rupee remained stable in the inter-bank market against the hype created in the past two days that it would nosedive on Monday (May 13).
“If the inter-bank market remains stable, the rupee will regain lost strength in the open market in the next couple of days,” he said.
Published in The Express Tribune, May 14th, 2019.