Dollar below 300 after over two weeks

The rupee continued to strengthen against the dollar in the interbank market on Tuesday, rising 0.42 per cent to below 300, a barrier it crossed for the first time ever on Aug 24. According to the State Bank of Pakistan’s data, the rupee closed at 299.89 on Tuesday compared to 301.16 a day ago. The rupee gained further strength through Wednesday, and is at 298.39 against 1 dollar presently.

In the open market, however, the rupee remained unchanged at 300 to the dollar.

The local currency has significantly gained in the past few days, with analysts attributing the rise to an ongoing crackdown on illegal dollar outflows.

Currency dealers in the interbank said exporters had been selling dollars on a large scale, fearing further devaluation.

However, due to the cheaper dollars, demand has started rising, which may disrupt the government’s plan to bring down the trade and current account deficits. The government has already been following the IMF’s directions to keep the imports open, but the availability of dollars was the main hindrance to imports.

Currency dealers said the export proceeds had increased liquidity in the banking market, which would ultimately increase the imports. The State Bank has already directed banks to open letters of credit only when they have foreign exchange. Bankers said the higher liquidity would surely increase imports in September compared to August.

Currency experts said the depreciation of the dollar could continue in the coming days, but the rate would never go back to the value prevailing in early July — around Rs275 — after the previous government managed to sign a $3 billion deal with the Intern­ational Monetary Fund.

The dollar then started rising and reached as high as Rs307 in the interbank market at the beginning of the first week of September.

However, a subsequent crackdown on illegal currency dealers across the country produced positive results, leading to a fall of over Rs30 in the dollar’s value in the open market and also impacting the interbank rate.