KARACHI, May 27: The euro skyrocketed to Rs68.53 in the inter- bank market here after it matched its all-time high of $1.1899 in the international market.

Global currency dealers quoted by news wire services said the current rise of the euro was sentiment-driven and the single European currency might see the $1.2 level before profit taking starts.

The euro has appreciated by about 27 per cent against the US dollar since its physical trading started in January 2002. From Rs54 at that time to Rs68.53 the upward journey of the euro has seen many exporters in Pakistani exploring more markets in the eurozone — and pricing their export bills in euro rather than in dollar.

Pakistan exports to eurozone that stood at 24 per cent before 2002 is now estimated around 27 per cent. This growth in exports to eurozone became possible not only because Pakistani exporters made more inroads into the eurozone markets on their own but also because the European Union eased quota restrictions. The easing came after Pakistan sided with the US-led “war on terrorism” in Afghanistan after 9/11.

“We are penetrating deeper into eurozone markets and we are also pricing more of our export bills in euro rather than in dollars,” says leading textile exporter Iqbal Ibrahim. “But the problem is that European buyers ask for price adjustments in view of the rising euro.”

Iqbal Ibrahim says many exporters believe that the current rise of the euro is driven more by a pro-euro sentiment than anything else so they are reluctant to lower their export bills on demand of the buyers.

But he says that the exporters will finally have to make some adjustments to ensure that their market share remains intact.

“If the exporters are a bit reluctant to make price adjustment in view of rising euro it does not surprise me,” says leading economist Dr. S. Akbar Zaidi. “Because the rise of the euro and the weakening of the US dollar was slightly unexpected for the markets.”

But he believes that the exporters could have planned better about pricing their export bills in euro after 9/11. In other words he shares the general perception that Pakistani exporters were initially not very keen to price their export bills in euro.

“That was because those of us who used to price their bills into European currencies instead of dollar had taken big hits in the past,” says Iqbal Ibrahim — referring to 1990s rapid rupee devaluations against the dollar. “But now people have confidence in euro.”

FUTURE OUTLOOK: Akbar Zaidi believes — and many shares this view both in and outside Pakistan — that the US economy would soon recover leaving little room for the euro to rise further or even to keep up where it is now. “The recently announced ($350 billion) tax cuts...and its historical (four-decade) low interest rates...and the policy to keep the dollar weak...would soon lift the US economy,” says Akbar Zaidi. “It is going to recover much sooner the European economy,” he says and argues that once this happens the euro might not keep its strength. “It might hit back the parity level,” he says.