PKR slides by Rs1.22 in interbank market

ISLAMABAD: The PKR continued to lose its value on Thursday, with analysts attributing the fall to a higher demand for dollars, particularly by travellers flying to the United Arab Emirates (UAE).

According to the Forex Association of Pakistan (FAP), the local currency lost Rs1.22 in the interbank market by 1pm and was being traded at Rs219.6 per dollar. In the open market, the rupee was being traded at Rs228 per dollar around the same time.

Komal Mansoor, head of research at Tresmark, said demand for dollars in the open market was “creating a stir” in the interbank. “Higher import duties and the new regulation on carrying dirhams have led to a surge in dollar demand in the open market,” she said, referring to a new condition requiring Pakistanis travelling to the UAE to carry 5,000 dirhams with them.

She said traders should keep in mind that the rupee would re-adjust its parity after the International Monetary Fund’s (IMF) Executive Board approves the loan tranche for Pakistan, which is expected later this month.

Saad bin Naseer, director of web-based financial data and analytics portal Mettis Global, said the rupee was witnessing volatility in the open market due to rising demand pressures from travellers and students exchanging local currency into dollars at exchange counters.

Naseer said demand for the dollar was stable in the interbank market as aggregate demand in the economy had slowed down, which meant that there was no pressure on the greenback from importers.

However, Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha disagreed with the view linking the rupee’s fall to travellers buying foreign currency. “80% of the people travelling from Pakistan to the UAE are doing so to take connecting flights. They do not need 5,000 dirhams. On the other hand, 18% Pakistanis are permanent residents so they do not need 5,000 dirhams either. It has not led to an increase in the demand for dollars.”

He said there were two reasons for the shortage of dollars — the government’s lifting of the ban on the import of non-essential and luxury items and the smuggling of the greenback into Afghanistan.

“Exchange companies were previously surrendering between $25-30 million in the interbank market which has now been reduced to $2-3 million. The currency is being smuggled to Afghanistan because of higher rates there,” the currency dealer said.

Paracha said there was a “severe” shortage of dollars and the difference of Rs10-11 between the open market and the interbank market had “never been seen before”.

The local currency had fallen to a record low of Rs239.94 on July 28. It had then recovered for 11 straight sessions, closing at Rs213.90 on August 16.

However, the rupee again started falling from August 17. It had lost Rs3.5 till August 24.