Dollar down by Rs17 in open market over two days

KARACHI: The Pak Rupee surged against the US dollar by PKR 17 in two days in both the open market and interbank, as positive sentiments from a meeting between the army chief and business community and a crackdown on illegal currency dealers boosted the local currency.

The rupee gained 11 rupees to close at 312 per dollar in the open market compared to 323 in the previous session, narrowing the gap with the official rate to 1.5 per cent, close to the International Monetary Fund’s limit of 1.25 per cent. The rupee also rose 0.04 per cent or 0.12 paisas to settle at 306.98 per dollar in the interbank, the State Bank of Pakistan (SBP) reported.

Pakistan is under an IMF programme that requires it to maintain a flexible exchange rate regime and keep the gap between the inter-bank and open market rates within 1.25 per cent. Currency dealers said the rupee was still benefiting from the meeting of the Chief of Army Staff General Asim Munir with the business community last week, where he assured them of his support to address their concerns and discussed the issues related to dollar smuggling and money laundering.

“The COAS meeting with the business community thoroughly took stock of the situation, especially the smuggling of dollar and subsequent crackdown on the grey market in Peshawar has seen the real factors behind the dollar depreciation in the open market,” said Zafar Paracha, General Secretary of ECAP. He also urged that the measures against dollar smuggling should be on a sustainable basis and not just a one-off action. “Market noise suggests the currency may fall below 300 level in the open market, and the inter-bank would follow soon,” said a dealer at a major bank.

However, some analysts cautioned that administrative measures alone could not sustain the rupee’s appreciation in the long run, and that improvement in dollar inflows was needed to address the widening current account deficit and falling foreign exchange reserves.

“Administrative measures can control the exchange rate in the open market, but controlling it in the inter-bank would require dollar inflows,” said Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited.

Meanwhile, in a surprising turn of events, gold prices in the local market experienced a significant downturn on Wednesday, shedding Rs10,500 per tola due to the strengthening of the Pakistani rupee.

Data provided by the All Sindh Sarafa Jewellers Association indicated that gold rates had plummeted to Rs222,300/tola, signaling a potential shift in the precious metal’s recent upward trajectory.

Similarly, the price of 10 grams of gold also witnessed a sharp decline, dropping by Rs9,002 to reach Rs190,586. This local price correction coincided with a $5 dip in gold rates in the international market, which settled at $1,926/ounce.

In a parallel movement, silver rates also experienced a decline, with prices falling by Rs100 to close at Rs2,700/tola. The cost of 10-gram silver saw a reduction of Rs85.73, reaching Rs2,314.81.

Muhammad Shafi Khan, a senior goldsmith with extensive experience in the industry, weighed in on the market dynamics. He noted that the international gold market had shown signs of a downturn, with prices touching $1,944/ounce recently. Simultaneously, the Pakistani rupee exhibited remarkable strength against the US dollar, a pivotal factor contributing to the sudden decrease in gold rates.