KARACHI: Rapidly growing foreign exchange reserves have failed to check appreciation of the US currency which has risen by 3.19 per cent against the rupee since July 2014.

Currency experts said that despite lesser demand for dollars due to low international oil prices, the rupee remained under pressure against the greenback during the first nine months of this fiscal year.

The State Bank of Pakistan reported that the country’s foreign exchange reserves rose to $17.7 billion by the last week of April 2015 from $11.753bn in April 2014.

In 2010-11, the country’s foreign exchange reserves soared to record $18.24bn while the price of US dollar was Rs85.50. The local currency has depreciated by Rs16.30, or 19pc, against the dollar since then.

“The strong commitment of $45bn investment by Chinese companies has yet not influenced the currency market, which means the exchange rate is under the influence of other economic factors,” said a currency expert in the inter-bank market.

Poor economic growth, absence of political harmony, terrorism and changing situation in the Gulf in the wake of Yemen war could be the factors influencing the exchange rate negatively, he said.

Currency dealers were charging almost Re1 more over the inter-bank price for a US dollar while they said there was no rush of buyers. “There may be a fear that the greenback could be stronger in the near future as it has been appreciating gradually since the beginning of this financial year,” they added.

However, they did not admit that currency smuggling was huge from Pakistan, but some recent incidents and reports about heavy investment in Dubai properties showed that dollar was in high demand, both in open as well as inter-bank markets.

Dealers said people could buy dollars from the open market and smuggle them outside the country, which is not their fault as they don’t know who is buying dollars for what purpose.

The government has decided to investigate that how billions of dollars were invested by Pakistanis in Dubai properties. Knowledgeable sources said a model from Lahore attempting to smuggle $500,000 was currently under investigation, while a few months back a boat with huge stocks of foreign currencies was also detained.

“The dollar was traded at Rs102.70 in the open market on Saturday which was slightly higher than Friday,” said Anwar Jamal, a currency dealer.

S.S. Iqbal, a fund manager and analyst, said the existence of current account deficit despite high foreign exchange has a negative signal for the exchange rate. However, once inflows start pouring in from Chinese commitment of $45bn investment could bring a positive change, he added.

Published in Dawn, May 3rd, 2015

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