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How long will the dollar rate keep dropping?

Experts differ where it will go

SAMAA | - Posted: Nov 9, 2020 | Last Updated: 3 weeks ago
SAMAA |
Posted: Nov 9, 2020 | Last Updated: 3 weeks ago
How long will the dollar rate keep dropping?

The dollar is losing steam internationally and it’s not just the Pakistani rupee that has been appreciating–the Pound and Euro are on the rise as well.

But in Pakistan, several other factors are also in play, not just the dollar’s international standing. Remittances have increased and the current account has also been in surplus for four straight months.

“There are several good initiatives taken by the State Bank,” said Malik Bostan, president of the Forex Association of Pakistan. “The demand for dollars has also been dropping.

“Overseas Pakistanis are taking interest in Roshan Digital Accounts. Meanwhile, the State Bank has also decreased the amount to be sent in remittances to $100, which has also increased dollar inflows,” he said.

Bostan says exports have also been picking up and all these factors combined suggest that the dollar rate may drop even further.

He added that Pakistan now has more loan options from the World Bank, Asian Development Bank and China, therefore any significant drop in Pakistan’s dollar or foreign exchange reserves that affects dollar rates may not happen 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 could 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 dollars when it is at a higher rate as the dollar rate has been dropping,” he said.

Punjani explained that exporters normally wait and watch the dollar 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. The resumption of the IMF programme next year and G20 debt repayments starting again from June will bring the rupee back under pressure.          

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