Rupee stronger against the dollar

LAHORE: The dollar on Saturday continued losing its value against the rupee, dropping even below the interbank rate suggesting ample supply of the US currency in the open market. The rupee gained against the dollar as it traded at Rs122.40 in the open market.

Market experts and analyst believe that this drop in dollar’s value is due to the political stability as a result of the general elections.

Earlier on Friday the dollar fell against the rupee and traded as low as Rs126-126.50 in the open market – well below the interbank rate of Rs128. Since Monday, the dollar has lost as high as Rs7.60 in the open market.

The interbank market remained relatively calm with slight fluctuations as it closed at Rs128 versus Rs128.40-128.50 on July 24, the last day of the week.

It was cited that another major reason was the State Bank of Pakistan’s (SBP) strict action against movement of cash from one city to another which was implemented from July 24.

Exchange Companies Association of Pakistan Secretary General Zafar Paracha said that “Since we cannot move cash from one city to another, it created a shortage in the market which is why the dollars are available but there is no cash to buy them, and so the greenback lost value”.

Capital Stake Director Research told Profit, “The gain in rupee seems to be a result of some sort of certainty on the political front. According to statements, the new government is all aware of the challenges and people are hopeful they will bring along solutions.”

She added that as a result of the general elections and with news of a $2 billion loan from Pakistan’s friend China will also help to some extent.

Pak Kuwait Investment Co. Pakistan AVP Research Adnan Sami Sheikh said, “Well there is a lot of speculation on the recent gains, but I would say it is the Chinese dollars inflow and exporters selling in the market coupled with a lack of rupee liquidity.”

He added, “The interbank is closed on Saturday hence it cannot provide correction. So, whoever wants to sell dollars urgently has to use exchanges. Hence, there is more dollar supply than demand and the rate gone down.”

Citing similar views, Topline Securities Chief Economist and Director Research Saad Hashemy said, “Gains of the rupee in kerb market is a good sign. However, sustainability of these gains will be determined by the interbank market which is much bigger.”

Market Analyst Hammad Malik told Profit, “I think Rs125 is a fair price against the greenback and it will likely revolve around it.”

It is pertinent to mention that the newly elected government faces serious economic challenges and will soon have to repay loans and pay back bonds that are nearing maturity.

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Eleazar Bhatti
Eleazar Bhatti
The writer currently serves as the Content Manager at Profit by Pakistan Today and is an economics graduate from Leeds Business School in the UK. He can be reached at elea[email protected] or at
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