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Devaluation: The day after — dollar steadies in interbank, falls in open market

Updated October 11, 2018

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A day after devaluation, dollar steadies in intermarket. — Photo/File
A day after devaluation, dollar steadies in intermarket. — Photo/File

KARACHI: The interbank market remained calm on Wednesday after a stormy session the day before but the open market in foreign currency saw erratic behaviour most of the day, with the dollar falling in the evening after $10 million remittances were received into the market.

The interbank market saw a 7.5 per cent depreciation of local currency against the US dollar on Tuesday, but the dollar traded below Rs134 all day on Wednesday.

“Most of the day we traded dollar in the range of Rs133.60 to Rs133.75 while it closed at Rs133.80 as tom rate (tomorrow rate),” said one currency dealer in the inter-bank market.

There was an unease but no panic buying of dollars. Bankers that Dawn spoke with were confident that no further depreciation of rupee was on the cards.

However, the open market saw volatility during the day while the currency dealers were selling dollars as high as Rs137 in early session of the market. The buying rate was about Rs133 which meant the dealers were earning Rs4 per dollar on buying and selling rates, far higher than normal.

“The situation changed when we received about $10 million remittances that were stuck up due to three-day closure of New York due to Columbus day. We received dollars around 3pm and supplied to the market which immediately resulted in fall of dollar prices to Rs133 and Rs134.50 as buying and selling rates,” said Malik Bostan, President of Forex Association of Pakistan.

In most exchange company outlets visited by Dawn, dollars were not available during the day but became available in the evening.

“Buyers were not there, we could sell just 30 per cent while 70pc of $10m remained unsold,” he said.

Currency dealers in the open market said the large supply of dollars could further reduce the dollar price in the open market which can fall even below the official banking rate.

“What is the final rate is the main concern for all of us,” said Anwar Jamal, another currency dealer in Karachi. Small currency dealers were cautious over holding dollars as their reserves.

In July the official rates were higher than the open market rates and finally the official rate also fell well below the depreciated level. The rupee was depreciated by 5 per cent to Rs128 in July but it fell back to Rs121.50 after general elections held on July 25. The open market rates were much below the official rate and traded in the range of Rs109 to Rs115.

Published in Dawn, October 11th, 2018