State Bank intervention drops rate back to Rs166
The dollar continued to soar against the Pakistani rupee on Friday as it reached an all-time high of Rs169 before the State Bank intervened.
The dollar jumped Rs11 in as many days to reach Rs169 in the interbank market. The State Bank was forced to intervene to keep the rate at Rs166, sources confirmed to SAMAA Digital.
A source in the market said the State Bank jumped in and piggybacked the dollar to the Rs166 level, where it was on Thursday. The State Bank has yet to release an official comment on the development, however, as per the central bank’s stated policy, it will intervene in case of volatility (any significant movement up or down) but won’t control the exchange rates and will instead leave them to the forces of demand and supply.
State Bank reserves are already under pressure to stem the rupee’s depreciation and have fallen by $800 million since early March, data shows.
The policy rate cut by 150bps to 11% played out negatively, say market experts, in terms of foreign investments. Forex Association of Pakistan President Malik Bostan said the pull out was already underway due to the coronavirus but the policy rate cut, which meant even less profit for investors, worsened the situation.
The Special Convertible Rupee Account, which records the inflow and outflow of foreign investments in equity and usury, drew a murky picture as it recorded outflow outpacing inflow.
A whopping $1.67 billion left Pakistan’s SCRA programme in March and this pressure inevitably reflected on the exchange balance.
Bostan said once the open markets are functional, he could plead to local buyers to dump dollars to tame the demand. “We have done this before upon the request of the prime minister.”