Rupee reaches record low of 310/dollar in open market

KARACHI: The rupee hit a fresh record low in the open market on Friday as a result of an increasing imbalance between demand and supply of the dollars, dealers said.

The domestic currency was selling at 310 per dollar, down from 309 on Thursday, according to the rates reported by the Exchange Companies Association of Pakistan. The local unit dropped by 1 rupee during the session.

However, in the interbank market, the rupee gained ground and ended at 285.15 per dollar, 0.21 percent stronger than the previous close of 285.74. The rupee fell again in the kerb market after being stable in the previous session.

The unexpectedly high price of the dollar on the open market can be attributed to three main factors. First, inflows have stopped; second, banks are no longer giving cash dollars to account holders and exchange companies; and third, the deteriorating political scenario has prevented currency holders from selling in the market, according to dealers.

The exchange rate difference between open and interbank markets on Friday swelled to around 25 rupees, which could encourage overseas Pakistani workers to use illegal means to send money home, dealers said.

The amount of money sent home by Pakistani citizens working abroad dropped 13 percent to $22.7 billion in 10 months of the current fiscal year. The rupee was appreciating in the interbank market in response to the news that China’s likely financial support will help Pakistan avert immediate default. Pakistan expects China to roll over more than $2 billion in debt that is due next month.

Pakistan is facing a significant debt repayment of $2.3 billion in June, while State Bank of Pakistan reserves currently stands at approximately $4.2 billion. “The country is relying on China's assistance to rollover the debt, although it is anticipated that a portion of the debt will still need to be repaid and will be received back in few days/weeks. This highlights the critical importance of debt rollovers, which is each month from now, to sustain the country's foreign exchange reserves and prevent a potential panic situation,” said Chase Securities in a note.