KARACHI, Oct 19: The US dollar fell below Rs59 in the inter-bank market on Saturday. This was not unexpected. Senior bankers said they were anticipating this amidst rising inflow of foreign exchange.

Dealers at leading banks said the dollar closed at Rs58.96-Rs58.97 for buying and selling against the previous close of Rs59.01-Rs59.02. They said earlier in the day the dollar traded as low as Rs59.04.

Senior bankers said the greenback could have fallen to further lows had the State Bank not intervened in the market meaning that it bought a few million of dollars from some banks. When Foreign Exchange Advisor of the State Bank Zafar Shaikh was approached by Dawn he said: “There was a huge supply of dollars in the market. The SBP had to help out the banks that were long in dollars and were unable to deploy the same.” He said the SBP “had to mop up excessive flows to keep stability in the exchange rates — and to build up reserves.”

This statement may have a soothing effect on the exporters who see the fall of the dollar below the psychological barrier of Rs59 as another blow to their shrinking margins. “This exchange rate level is not sustainable for the exporters,” said director of a leading textile group Iqbal Ibrahim. “The cotton prices are up. The international recession is there. The power tariff knows no boundaries. And the dollar has been falling. So this is a grim situation,” he said.

Another textile exporter Majyd Aziz said the falling value of the dollar would further squeeze the exporters margins. “The lower the dollar the tighter the noose around our neck,” he said. Majyd Aziz had a long list of problems confronting the exporters: “Our sales tax refund are stuck up. Input cost is rising. Water scarcity (in Karachi) has forced dying units to delay supply of dying orders. Uncertainty prevails about continuation of economic policies and foreign buyers are not coming here due to poor law and order situation.”

Several other exporters interviewed by Dawn said the fall of the dollar as such had not given a jolt because the exporters community was anticipating this. “Finance Minister Shaukat Aziz told us point blank before elections that the central bank had been defending the dollar beyond its means,” said a top Karachi- based exporter who refused to go on record. The minister has been on record saying that the dollar may fall to Rs55 if the SBP stops defending it.

The exporters say it is the overall politico-economic scenario at home and recession around the globe that makes it difficult for them to absorb the impact of even a slight fall in the dollar value.

Since July 1 this year the US dollar has shed 1.8 per cent of its value against the rupee chiefly due to increased inflows of foreign currency funds from expatriate Pakistanis; disbursement of debt tranches by world lending agencies and payments made in connection with the privatization of United Bank and other state- run organizations.

In July/September this year home remittances or the money sent back home by expatriates more than doubled to $926 million from $264 million a year-ago. Pakistanis living abroad particularly those in the US are sending more money back home through official channels after the US government started investigating the bank accounts of foreigners — more specifically the Muslims to block possible funding to what the US calls “terrorist organizations.”

In mid-July the central bank watched from the sidelines as the greenback slipped through the psychologically important barrier of Rs60 — and three months afterwards — it let the US unit fall below Rs59 but successfully contained its decline.

“Had the SBP not come to the rescue of the dollar today it may have fallen to Rs58.85,” estimated treasurer of a foreign bank.

KERB MARKET: The dollar lost five paisa against the rupee in the open market on Saturday mirroring the fall of the greenback in the inter-bank market.