KARACHI: The local currency overpowered the dollar on Thursday, forcing the greenback to shed value in both the inter-bank and open markets.
The dollar was traded at Rs103.50 in both markets indicating that the rupee is gaining faster than the market expectations which pushed investors to sell their holdings. The selling volumes doubled in last two days in the open market.
Currency dealers said the sellers got nervous as their holdings value starts eroding.
“All indications suggest that the dollar will fall to Rs102 soon and the local currency will bounce back to Rs100 within a few months,” said Malik Bostan, the chairman of Exchange Companies Association of Pakistan (ECAP). The greenback lost Rs2 in the open market and Rs1.50 in the inter-bank market in the last two days.
He said the State Bank’s governor assured on Friday that the stuck-up export proceeds worth hundreds of millions of dollars would soon land into the country. “I don’t know the exact figure of stuck-up proceed but it could be in the range of $1 billion,” he said.
Exporters have to surrender dollars within 130 days, after that the State Bank could penalise them. The SBP usually avoids penalising and the exporters are given time to bring back the proceeds.
The currency experts and dealers said the inflows would increase within a couple of months. The IMF’s second tranche of $550m is expected by the end of this month or next month while the government is expected to launch Eurobond of $500m next month.
“Market was flush with the dollars as buyers were not more than 5 per cent; 95pc were selling which has slashed the rate to six-month low,” said Anwar Jamal, a currency dealer and expert on currency movement.
Bankers said the inflows of remittances increased which may easily cross the figure of $15bn by the end of this fiscal year.
The central bank reported on Thursday that the country’s reserves increased to $8.7bn while the holdings of the State Bank were $3.9bn. The finance minister recently said the reserves would exceed $10bn by end of this month.
The forex association has lifted the cap over restricted supply of dollars to the general public. Mr Bostan said the ECAP has opened counters across the country to provide excess amount of dollars to all money changers who face shortage of the US currency.
Currency experts said that with higher export under GSP Plus facility, more dollars are expected to come while the outflow would reduce particularly in the wake of small repayments to the IMF.
“It’s great to see that the local currency bounced back to Rs103.50 from Rs112 just a few months back,” said a senior banker. “It may fall further.”