KARACHI: Days after the removal of the artificial upper cap on the rupee, which sent the local currency into a tailspin, the dollar’s black market rate has matched its open market rate, but uncertainty gripped both sellers and buyers. away on Friday.
The rupee was down 2.7 percent at 262.6 in the interbank market, after plunging 9.6 percent on Thursday, its biggest decline yet, according to the central bank.
However, brokerage firms released the interbank rate of Rs 265 on the same day, reflecting rate fluctuations at various banks. In the open market, the rupee fell by Rs 7 to 269, while the Kabul rate was 270 on Friday.
Some currency dealers said the late evening open market rate was Rs 275, but trading was almost flat.
The rupee is falling to adjust to a market-based exchange rate after an artificial ceiling on the local currency was lifted in line with IMF demands.
Lifting the cap has caused the two markets to align more closely, and exchange firms expected the black market for dollars to finally dry up.
The country is in dire economic straits servicing endless foreign debts and battling rising inflation. Moreover, left with only $3.68 billion in foreign reserves, Pakistan barely has enough to cover three weeks of imports and desperately needs the IMF to release the last $1 billion tranche of its bailout program to prevent a default. hold potential.
The IMF said in a statement late Thursday that a review team would arrive in the capital Islamabad on Tuesday in an effort to break the deadlock over releasing more financial aid.
“Stability in the exchange rate is the key to knowing the true value of the rupee. Only stability can convince exporters and others in dollars to sell their assets,” said Zafar Paracha, secretary general of the Pakistan Exchange Companies Association.
He said that once the dollar-rupee relationship is resolved, dollar holdings will flow into the market. The banker also said that exporters did not sell their earnings, which could ease the country’s cash flow.
Bankers also believed that stability was necessary to attract exporters and others to sell their dollars in the belief that they were getting the highest price.
A senior currency market banker also confirmed that exporters did not sell their export earnings.
However, Mr. Paracha said the State Bank’s decision to issue cash dollars to exchange companies was not implemented. In a meeting on Thursday with representatives of exchange companies, the vice president of the State Bank advised the banks to pay cash dollars to the accounts of exchange companies in advance.
“Friday’s trading was uneventful. If cash dollars are available according to the advice of the State Bank, liquidity will have a positive effect on rates in the open market,” he said.
Meanwhile, devaluation is bound to create another wave of inflation, already at 25pc, but the empty-handed government is willing to take all the risks to get some dollars.
Posted in Dawn, January 28, 2023
