May 24, 2003	Saturday	Rabi-ul-Awwal 21,1424

KARACHI, May 23: The rupee on Friday inched up to 57.62/57.64 against the US dollar in the inter-bank market from 57.66/57.68 on Thursday as the State Bank did not intervene in the market to buy dollars.

After remaining stable for quite some time the dollar started falling this week as, according to senior bankers, the central bank first minimized and then suspended dollar buying to let the rupee rise. During this week the rupee has gained 16 paisa rising from 57.78/57.80 on Monday to 57.62/57.64 on Friday. Senior bankers say the local currency may gain further as there are indications that the SBP foreign exchange buying from banks would remain limited in the days to come.

The State Bank of Pakistan has been purchasing excessive inflows of foreign exchange, mainly from overseas Pakistan, from the inter-bank market to keep the dollar stable for the benefit of the exporters. Despite that the dollar has fallen by more than four per cent so far this fiscal year. Sources close to SBP say the central bank may let the dollar slip to Rs57.50 or so before the annual budget due on June 7.

Bankers say allowing the rupee to gain some weight makes sense because the Indian rupee has also risen substantially. Pakistan and India keep an eye over the movement of their respective currencies in relation with each other’s because they compete fiercely in the world export market of several commodities. Any rise in the value of Indian rupee makes room for policy makers in Pakistan to adjust their currency accordingly without harming the competitiveness of Pakistani exporters.

Bankers also say the rise of the euro past its launching parity with the US dollar has also created an enabling environment for the policy makers to allow the rupee to gain some weight. Because the almost negligible impact of a slight fall in the dollar value against the rupee on exports would be more than compensated by a phenomenal rise of the euro against the local currency.