Rupee dealt more blows by surging dollar demand

KARACHI: Rupee on Tuesday suffered more losses versus dollar in the open market, pushing investors to take refuge in the greenback safe haven ahead of a deadline on encashment of prize bonds worth Rs40,000, this month, dealers said.

The rupee was quoted at 168.70, but traders reported that some trades were concluded at 168.80 to the dollar. On Monday, the local unit ended at 168.10 in the open market.

“One of the major reasons for a persistent slide in the rupee’s value is that investors of the Rs40,000-denominated prize bonds are surrendering their bonds and heavily buying dollars from the kerb market to keep their investment in the US currency as they will no longer be able to encash and redeem their bonds after September 30,” said Malik Bostan, the chairman of the Exchange Companies Association of Pakistan, while talking to The News.

“So, far, there is no clue of an extension in the expiry date of the encashment of the prize bonds, which has triggered the demand for the greenback from general public and investors.”

People were left with no option but to invest their undeclared money in dollars following the government’s decision to tighten the noose of the real estate sector as it aimed to meet the requirements of the Financial Action

Task Force (FATF) related to non-financial businesses to combat money laundering and terror financing, Bostan added.

“We demand the government to give investors an extra three months to encash their prize bonds, extending the deadline to December 31. So, the investors will be able to do that easily, especially overseas Pakistanis, who have put their sums of money in this instrument.”

The government restricted the sale of National Prize Bonds (Bearer) of Rs40,000/- denomination after June 24, 2019.

Bostan further said the widening trade gap, given higher imports, including vaccine imports, and a slowdown in exports and dollar outflows to Afghanistan was also exerting pressure on the domestic currency.

“The best way to manage currency is whether curb the demand or increase supply. There is a need to reduce imports and increase inflows through exports and remittances,” Bostan said.

The rupee extended losses in the interbank market as import payments, current account deficit concerns, and political tensions in Afghanistan continued to hit the domestic currency.

The rupee ended at 167.63 per dollar, compared with Monday’s close of 167.23. It weakened by 0.24 percent against the greenback. Traders still see 168 as a support level for the rupee in the coming sessions.