Currency up 1.9 percent in open market: Rupee continues recovery as exporters seen selling dollars

KARACHI: The rupee strengthened in the open market on Saturday, notching up a third session of gains amid heavy dollar selling by foreign currency holders, traders said.

The rupee was up 1.9 percent against the dollar at 125, after trading higher at 127.50 the previous day.

The local unit has appreciated by 4.43 percent during the outgoing week.

“There is panic-selling and a dearth of buyers after the uncertainty eased due to timely holding of general elections,” said Zafar Paracha, the secretary general at Exchange Companies Association of Pakistan.

“The recent crackdown by the law enforcement agencies against the illegal money changers, and sealing of Afghanistan and

Iran borders with Pakistan during the last three to

four days due to elections also increased supplies

of dollars to the kerb market.”

A currency dealer told The News that people were reluctant to buy dollars.

However, the retail investors and general public were frequently seen purchasing dollars from the exchange companies in the open market and depositing them in their foreign currency accounts on expectation of further currency depreciation by the central bank.

Malik Bostan, president, Forex Association of Pakistan attributed the latest rise in the rupee to the circular issued by the State Bank of Pakistan early this month.

“Around 30,000 locations of the illegal money changers have been closed so far after the State Bank of Pakistan made it mandatory for the exchange companies to ensure documentation of inland currency transportation and movement of foreign currencies as well,” Bostan said.

“Only bank accounts are (being) used for the

movement of the rupee

between the cities. Resultantly, the exchange

companies have ample supplies of the greenback to cater to the market demand,” he said.

“Unlicensed companies no longer exist in the foreign exchange market. This has also encouraged (supply).”

He also disclosed that currently the open market has $5-6 million in surplus daily, compared with $1-2 million last week.

Market watchers are convinced that Pakistan Tehreek-e-Insaf, after maintaining lead in polls, will form a government with the help of small coalition partners in the centre, and at least in one province soon.

The chances of political stability sent a positive signal to the investors and brought stability to the currency market.

Likely new finance minister Asad Umer has clearly indicated that the country could seek a fresh bailout package from the International Monetary Fund (IMF) to shore up its falling foreign exchange reserves.

The country needs $8-10 billion in external financing to avert a potential balance of payment crisis.

Rupee continued to strengthen in the interbank market, closing at 127.86 on Friday.

It ended weaker at 128.50 a day before polls.

The currency has posted decent gains post general election.

But analysts believe whether gains can sustain will likely hinge on fresh dollar inflows from external sources such as the

International Monetary Fund and the bilateral creditors such as China or Saudi Arabia.

The new government may also consider issuing sovereign bonds in international capital markets to improve its reserves position.