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Dollar continues to slide, falls below Rs154 in Pakistan

Experts see short-term appreciation of dollar

SAMAA | - Posted: Mar 30, 2021 | Last Updated: 2 weeks ago
SAMAA |
Posted: Mar 30, 2021 | Last Updated: 2 weeks ago
Dollar continues to slide, falls below Rs154 in Pakistan

The US dollar was selling at Rs153.2 in the interbank market after losing Rs0.8 value overnight, which is nearly a two-year low. The last time dollar sold below this level was on June 13, 2019.

“The foreign exchange inflows are good so is current account and remittances,” said Raza Jafri, the head of Equities Intermarket Securities. “It seems rupee will appreciate on short-term basis.”

However, Jafri said that rupee may get back into depreciation mode, when things come back to normal once the coronavirus pandemic is over.

When things return to normal, oil prices may increase so would imports, bringing back rupee under pressure.

“The market sentiments are that the dollar will further shred its value more,” said Zafar Paracha, the Exchange Companies Association of Pakistan secretary.

The dollar rate fell by Rs4.7 or 3% during March from Rs158.10.  

“When the market behaves this way, the selling begins which further puts the dollar under pressure,” he said. “The same thing happens when the market expects the dollar to rise, people start buying, and subsequently dollar rate increases.”

This market sentiment is due to improved inward remittances and lower outward remittances, according to the ECAP secretary. “Dollar may further lose its value and it can go down to as low as Rs152,” he said.

Paracha said the Naya Pakistan Certificate offers a lucrative 7% interest rate, which was increasing the flow of dollars into the country.  

BMA Capital’s Head of Research Faizan Ahmed also said that he sees the dollar fluctuating between Rs152 and Rs155.

“The market was expecting that current account deficit would be high in February, something around $500 million but it actually came out at only $50 million,” he said. “It also played a role in the falling rates of dollar recently.”

During the first eight months of the fiscal year 2021, the current account showed a surplus of $881 million as compared to a deficit of $2.74 billion in the same period last year.

Ahmed added that inward remittances have fared better too, contrary to the market expectations.

The remittances stood at $18.7 billion in the first eight months of FY2021 (July to February), which was 24% higher than the remittances during the same period last year.

Meanwhile, Ahmed said that Pakistan is going to issue Euro bonds to the tune of $3 billion in the international market, which along with inflows from the World Bank and IMF, would further shore up dollar reserves.

The State Bank of Pakistan recently announced that remittances sent through Roshan Digital Accounts had crossed $650 million in eight months.

“I believe Roshan Digital Accounts has immense potential. The response so far is low because people are learning—both the overseas depositors and bank staff involved,” Paracha said. “The State Bank needs to conduct more awareness programmes to tap its actual potential.

“According to my assessment, remittances and investment through Roshan Digital Accounts can increase to $1 billion every month within a couple of years,” he added.

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