Dollar rate falls in the interbank but the market is once again calling the bluff

ISLAMABAD: Since October 2022, there has been a discrepancy in the prices of the dollars at the interbank level and that at the open market level. Sometimes that discrepancy was driven by market forces while other times it was subdued by self-imposed price caps. The discrepancy became prominent in January right before the dollar rate first touched the 255 mark. The little discrepancy that was left behind, was cleared in the first week of March when the greenback hit its highest ever level (285) against the rupee in a single day’s trade.

Ever since that plummeting of the rupee against the dollar, the interbank and the open market rate have been at a stalemate. Both these rates have been hovering around 290 and it was thought that some semblance of stability might have been achieved. The market anticipated that the price of the greenbacks had reached its peak and for the first time in a few months, the market started seeing some selling of the US Dollars. 

But this feeling of stability was short-lived. As delays in the staff-level agreement with the IMF have reached a 2-month mark, the speculators have started seeing default as an imminent reality. In such circumstances, the market has seen a drying up in selling activity but more importantly, the chatter that the value of dollar is in fact upwards of 300 is now public discourse. Even when the interbank rate dropped below 284, after the confirmation of a pledge of $2 billion dollars from the Saudi government, the open market stood firmly at 290+.

This results in the booming of the business of the black market fear mongers and also creates an excessive demand for dollars in the market. As of 7th April, the interbank dollar rate stood at 284 Rs/dollar whereas the open market quotations obtained by Profit stood at 293 Rs./dollar. Let us see how the regulator reacts to the gap this time. Is another depreciation around the corner or will the IMF tranche make it in time?