KARACHI: The ongoing Yemen crisis may cause dollar’s appreciation against the rupee as strengthening oil prices, which have already touched five-month high, may push up demand for the greenback by the private sector to foot the rising oil import bill. Experts said that the changing situation in the Gulf may increase pressure on the dollar.

“The jump in oil prices to $65 per barrel on Friday from below $50 a couple of weeks back can change the scenario,” said Atif Ahmed, a currency dealer in the inter-bank market. The open market exhibited the rising potential of the US currency on Saturday, while there was no such trend in the inter-bank market.

Oil prices have already touched five-month high. The oil import payment is fully met by the private sector which has to purchase dollars from the inter-bank market. Last year, the country’s oil import bill stood at $14.8 billion.

The country’s oil import bill fell in recent months despite increased consumption of petroleum products thanks to rock-bottom crude oil prices on the international markets. But spike in prices after tension in the Middle East could reverse the trend.

If oil prices remain high due to the Yemen war, the dollar may rise against the rupee in the coming weeks as there is a fear that oil supply from the region could see a disruption.

“The country’s oil import bill may jump by 10 per cent in the next few months,” said Anwar Jamal, a currency dealer.

The inter-bank market did not show signs of pressure, but influence from the State Bank to keep the dollar below Rs102 during a couple of weeks was visible.

The open market has been selling dollars at much higher rate and the gap between the two markets during the week was as high as Rs1.30.

During the week ended on Saturday, the open market witnessed rise in the dollar price as it was traded at Rs102.70 in the open market, reaching close to psychological barrier of Rs103. The difference in the rate in the inter-bank was more than Rs1.05 on Friday.

Dealers said that after touching Rs102, the dollar has settled below Rs102.

Published in Dawn, April 26th, 2015

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