KARACHI: The US dollar gained Rs2 against the rupee in the open market on Monday as there were strong speculations that the local currency will depreciate further after signing of a bailout agreement with the International Monetary Fund (IMF).

The IMF spoke of a “market determined exchange rate” in its statement on the programme, and the financial markets have not taken the words very well.

Speculation has broken out in the forex markets, with small and large investors looking towards the greenabck.

However, market sources on Monday did not report any panic in the market at this point.

According to currency dealers, dollar was trading at Rs143.70 on Monday but ground reports showed the rate to be closer to Rs144.50 in Karachi. Reports from other cities, such as Islamabad, were higher still. The rate was stable in the interbank market though, standing around Rs141.50.

“We are not allowed to cross the Rs141.50 line, though the potential for higher rate of dollar is visible” said a banker in the inter-bank money market.

“Fears of further devaluation as a result of the agreement with the IMF have depressed the currency market and the rupee may lose more against the greenback in the coming days,” said Secretary General of Exchange Companies Association of Pakistan Zafar Paracha.

Most of the currency dealers and experts have expressed their disappointment over the undisclosed conditions agreed between the IMF authorities and the government.

Consequently, hoarders remained active while the grey market found space to run illegal business with speculative rates.

Dealers were generally found confused in the post-IMF agreement scenario while they felt that they have been kept in the dark over the future of exchange rate and the overall economy.

“I believe foreign exchange inflows have increased by estimated five per cent due to Ramazan,” said President Forex Association of Pakistan Malik Bostan.

He said that normally inflows during Ramazan increase by 15-20pc but this year’s inflows have not been in line with that trend.

Moreover, demand for the greenback also picks in Ramazan due to seasonal effects as people travel to Saudi Arabia to perform Umrah and other religious rites.

“The dollar may gain more against rupee if the rate in the inter-bank market is changed upward.

Market was expecting a change on Monday but it was good that the inter-bank rates remained unchanged,” said Bostan.

Published in Dawn, May 14th, 2019