Appreciation driven by COAS-businessmen meetings: Open-interbank gap falls below IMF’s suggested level of 1.25pc
KARACHI
Pakistani rupee extended gains against the US dollar in the open market for the second straight session on Wednesday and appreciated by Rs13 (+3.99 percent).
According to details, the rupee was quoted in the range of 310-313 against the dollar in the open market as compared to 320-326 a session earlier. The local unit appreciated against the greenback in the open market by Rs8 (+2.40 percent) on Tuesday last. Overall, the rupee has appreciated by Rs21 in two sessions.
Similarly, in the black market/Hundi, the dollar fell to Rs323 as compared to Rs343 in the previous session. Overall, the rupee has appreciated by Rs27 in two sessions.
The State Bank of Pakistan (SBP) said in a tweet that the rupee opened at 307.10 against the dollar in the interbank market and closed at 306.98, showing an appreciation of Rs0.12 (+0.04 percent). The rupee registered 10 all-time lows against the US dollar in the interbank market in more than two weeks before this appreciation. The rupee depreciated against the US dollar in the interbank market by Rs4.47 last week, Rs20.99 during the current fiscal year 2023-24, and Rs79.55 in the current year.
Currency dealers attributed the halt in currency free fall to the Chief of Army Staff (COAS) Asim Munir’s recent meetup with the business community on Sunday. During the meeting, the army chief discussed the government’s economic plans and intentions to quell smuggling and speculative activity.
Being under an International Monetary Fund (IMF) programme, the exchange rate gap between the inter-bank and open markets – called the premium by the IMF in its country report on Pakistan published after the Stand-By Arrangement’s approval by the Executive Board – needs to be around 1.25 percent. At present, the gap between the open market and interbank has fallen to 0.9 percent below the IMF’s suggested level of 1.25pc.
The open market fluctuated on Monday as well during the day with the rate for greenbacks going up to Rs338 but coming back to the previous closing of Rs334. The news about billions of dollars of possible foreign investments in Pakistan was listened to closely by the market and currency dealers said the claim could keep the market peaceful for the next few days.
Malik Bostan, Chairman of Exchange Companies Association of Pakistan, said that the government and the relevant authorities have taken strict steps to control the “black market” which has resulted in the gap between the open market and the interbank to reduce.
“The appreciation is being driven by the COAS meeting, under which issues pertaining to US dollar smuggling were discussed,” said Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited.
He said that customers who had been holding dollars are now selling it in the open-market. However, the real issue is improvement in dollar inflows, which is a long-term solution, he further said. “Administrative measures can control the exchange rate in the open market, but controlling it in the inter-bank would require dollar inflows,” he added.
“Market noise suggests the currency may fall below 300 level in the open-market, and the inter-bank would follow soon,” said a dealer. Additionally, personnel of law enforcement agencies were also deployed at exchange companies for monitoring of dollar trading on Tuesday, he added.
