Alert Sign Dear reader, online ads enable us to deliver the journalism you value. Please support us by taking a moment to turn off Adblock on

Alert Sign Dear reader, please upgrade to the latest version of IE to have a better reading experience


Dollar-gold relationship hits rupee

April 28, 2013

KARACHI: The dollar-gold relationship has hit the local currency hard, and it has set the exchange rate of Rs100 against the greenback as a benchmark in the open market.

A sudden demand for gold in Pakistan and India has escalated dollar demand in the open market, particularly in Pakistani market from where importers buy dollars, and put them in their accounts and then import gold from Dubai.

The State Bank in its second quarterly report recently noted that jewelery export jumped by 300pc during the first half of the current fiscal year.

Currency experts and dealers in the open market said that Rs100 is now benchmark and it may depreciate under the circumstances which weaken the local currency and increase demand for both gold and dollar.

Gold had lost attraction a couple of weeks ago when it was quoted at $1320 per ounce, the two-year low.

The fall in gold prices channeled investments in the only strong global currency which frequently appreciated in the international market.

Now high demand for gold has pushed up prices and increased pressure for dollar in the local market, said Malik Bostan, Chairman, Exchange Companies Association of Pakistan.

He said gold buying in Dubai has increased dollar demand in Karachi and other main markets of Pakistan.

The importers are not allowed to open L/Cs and dollars are not provided through banking channels.

The importers have to buy from open market for gold import.

“Jewelry exports continued to grow strongly and recorded a 300pc year-on-year growth during the first half of the current fiscal year,” said the State Bank report.

This surge is attributed to sharp rise in the price differential between the domestic and international gold prices, said the SBP.

Gold in Dubai rose to $1460 per ounce and may see a rise with the increasing demand from Pakistan and India.

Anwar Jamal, another currency expert, said that the local currency has several negative indicators which are working against its strength.

Uncertainty and reports of blasts in Karachi have shaken the market that encourages local investors to buy dollars for avoiding further erosion of rupee value, said Anwar.

The benchmark rate for dollar has been set at Rs100 in the open market despite strong resistance shown by the inter-bank while currency experts said that the exchange rate would see more shocks in the coming weeks.

The dollar crossed Rs100 mark on Friday for the third time during the last couple of months and the rate remained stable on Saturday in the open market.

The market was also filled with rumours that the IMF wants more depreciation of local currency for any future agreement for loans.

The falling reserves of the State Bank and increasing repayments to IMF have threatened the exchange rate regime.

The dollar was traded at Rs98.48 in the inter-bank market on Friday, but it failed to pass on its strength to the open market.