The falling demand for dollars is reducing its rates
The demand for dollars in Pakistan has dropped, which has brought the greenback rates to Rs158, according to Malik Bostan, president of the Forex Association of Pakistan.
Exchange companies are now buying dollars from the public or in the open market at Rs158 and selling with a 30 paisa profit at Rs158.30.
The dollar rate in the inter-bank is Rs158.40 when buying and Rs158.50 when selling. The banks do dollar transactions for exporters and importers. The dollar rate dropped by 20 paisa on Wednesday.
“The higher rate at inter-bank compared to the open market shows that the rupee has strengthened,” Bostan said. “People were selling dollars and no one was buying it.”
The dollar is losing steam internationally and it’s not just the Pakistani rupee, the Euro and Pound have also been appreciating against the dollar.
But in Pakistan, several other factors are also at play, not just the dollar’s international standing. Remittances have increased and the current account has also been in a surplus for four straight months.
“There are several good initiatives taken by the State Bank. The demand for dollars has also been dropping,” Bostan said.
“Overseas Pakistanis are taking interest in Roshan Digital Accounts. Meanwhile, State Bank has also decreased amount to be sent in remittances to $100. It has also increased dollar inflows,” he said.
Bostan says the exports have also been picking and all factors suggest that the dollar rate may drop more.
He added that Pakistan now has more loan options from the World Bank, Asian Development Bank and China and therefore any significant drop in Pakistan’s dollar or foreign exchange reserves, which affects dollar rates, may not be happening in the foreseeable future.
He added that Pakistan’s reliance on the dollar may also reduce as China and Pakistan are now looking to trade in Yuan, the Chinese currency. Pakistan’s biggest import bills come from China.
“I think if the dollar rate drops below the Rs155-mark it can even go to Rs150,” Bostan said.
However, another senior research analyst Karim Punjani says the dollar may fall another rupee or two but will eventually bounce back to around Rs164.
“My sources in the banking industry say exporters have been cashing their export receipts as soon as they can to cash dollar when it is on a higher rate as the dollar rate has been reducing,” Punjani said.
Punjani explained that exporters normally wait and watch where the dollar goes and if it is going up, they wait as much as they can to cash their export receipts, which are in dollars. Since it is now falling, exporters are now cashing export receipts.
Punjani says exporters won’t be doing this for long as there must be limited export receipts. Moreover, the resumption of the IMF programme next year and G20 debt repayments restarting from June will bring the rupee back under pressure.