Forex traders foresee rupee stabilising at 185 level

KARACHI: Given the rising trend of rupee against dollar and a possible bailout package from the International Monetary Fund, the forex traders are expecting the Pakistani currency to stabilise at Rs185 against a dollar by the end of the month.

“We see the rupee strengthening further after the country receives IMF funds, as this money will help support the currency and bolster the foreign reserves,” said Malik Bostan, the chairman of the Exchange Companies Association of Pakistan, adding there are chances of rupee trading at 185 level soon.

Pakistan received the letter of intent from the IMF on Friday and sent it back after signing it on Tuesday. To approve a rescue package for the country, including the disbursement of approximately $1.18 billion, the IMF called a meeting of its executive board on August 29.

The IMF board approval will help unlock funding from the bilateral and multilateral creditors and friendly countries.

“Exporters are bringing dollars in huge sums to the interbank market in anticipation of rupee’s appreciation in coming days,” Bostan said.

“The general public is selling $20-40 million foreign currency to the exchange companies daily, which is higher when compared to $10.15 million last month,” he said.

The rupee has increased 11 percent against the dollar so far this month, also outperforming major global currencies. The rupee saw a sharp recovery after it sank to a record low of 240 per dollar set in late July, becoming the worst performing currency in the world. The rupee plunged by 34 percent in July alone, suffering its biggest monthly fall since 1972.

Money changers praised the central bank’s decision to allow them to export the US currency to the international market, saying this move would help appreciate the rupee and shore up foreign exchange reserves.

The State Bank of Pakistan has permitted the exchange companies to export US dollars to divert the flow of foreign exchange mobilised by them towards the interbank market.

In a circular issued on Monday, the SBP said the proceeds of such exports, which will be in the form of remittances, must reach the USD account of the exchange companies maintained with banks in Pakistan, within three days of such export. The exchange firms will surrender 100 percent of foreign exchange received on account of the export of USD, in the interbank market on the same day. This facility will be available until September 30, it added.

After the new directives, the exchange firms can export dollars to the money changers of Dubai and Bahrain. Earlier, the currency dealers needed to take approval from the SBP before exporting such cash due to which the capital of the exchange companies was blocked for five days.

“Now I request that all exchange firms purchase dollars from sellers at a low-profit margin, export this cash to the currency dealers in other countries, and then give it to the banks, which will improve the dollar liquidity in the interbank market,” said Bostan.

He added that the dealers had asked SBP’s acting governor, Dr Murtaza Syed, and deputy governor, Dr Inayat Hussain, to enable them to export dollars once, just like they can export other foreign currencies like the Saudi riyal, the UAE dirham, the pound, and euro.

The forex firms were experiencing cash flow issues and were refusing to buy US dollars from customers due to a lack of funds.

“The foreign exchange market has stabilised, and the rupee is currently trading at its true value. The spread between the interbank and open markets over rates has shrunk, which has caused the rupee to depreciate in the kerb market,” according to Zafar Paracha, the secretary general of ECAP.