On Thursday, the Pakistani rupee pleasantly surprised by appreciating against the US dollar. Profit reached out to currency dealers to get the recent open market rate. The open market buying rate for USD was reported at Rs 286, while the selling rate stood at Rs 287.85. However, the dollar is still being traded at Rs 300+ in the grey market.
Rupee appreciated against US dollars following a decision made by the State Bank of Pakistan (SBP) the day before, that granted banks the authority to purchase US dollars from the interbank market for settling card-based cross-border transactions with International Payment Schemes (IPSs). The central bank’s intention behind this move was to bridge the gap between exchange rates in the interbank and open markets. Prior to this change, banks have been purchasing dollars from exchange companies for the past 17 years.
However, with the recent SBP directive, banks have been facilitated as they can purchase dollars from interbank market for such payments.
The open currency market experienced a significant demand for US dollars due to various factors. Travelers, students, and pilgrims were purchasing dollars from exchange companies, and banks were also buying dollars for settling card-based cross-border transactions with IPSs. This resulted in higher rate of USD in open market.
With devaluation of the Pakistani currency and rise in dollar rates in the unofficial market, exchange companies have been greatly affected, leading to a decrease in inflows. Additionally, the constant appreciation of the dollar against the PKR has discouraged foreign currency holders in Pakistan from selling their holdings, further reducing market trading to just 20 percent.
But with banks now given the option to buy and settle payments through interbank, trading in open market would further decrease which would increase pressure on exchange companies and may lead to the appreciation of the Pakistani rupee against the US dollar in the open currency market.
Zafar Paracha, the General Secretary of the Exchange Companies Association of Pakistan, expressed his optimism, stating that the difference between the open market and interbank rates would reduce by Rs 20-25 within the next few days. He further projected an immediate shrinkage of Rs 15-20 on the same day, June 1.
However, the SBP has now expanded the options by permitting banks to purchase the greenback from the interbank market to facilitate such payments. This facility is initially provided for a two-month period until July 31, 2023.
Currency experts and bankers involved in the currency business praised this significant step, especially considering the high dollar rate in the open market. The shortage of dollars in the open market led to a steady increase in the greenback rate. The open market dollar rate had soared by Rs 30 to Rs 35 per dollar.
Paracha’s projection turned out to be true as the rupee appreciated in the open market against USD. Mohammed Sohail, the CEO of Topline Securities Limited, noted “Pakistani rupee appreciated in the kerb market against the US dollar”. However, sources say that this appreciation of the rupee is artificial. According to the sources, currency dealers are only buying at this rate and not selling. So no transactions are taking place, which means that this is not the actual open market rate. Actual transactions are taking place at 300 plus, in the grey market where sellers and buyers decide a consensual rate.
