KARACHI: In the last 10 days, the local currency has lost Rs5 against the dollar setting a new record of Rs154 in the interbank market.

The rupee’s slide continued on Thursday as it fell as low as Rs154 in the interbank market.

“There was no check from the State Bank. A panic-like situation was seen in the market since every offer to sell dollars was higher than the previous one,” a banker said while explaining the volatility.

He said that in the first trading session, the dollar crossed Rs153 mark and was traded at Rs153.10 but tomorrow’s (Tom value) settlement was even higher.

“If [the rupee’s slide] is not stopped, the dollar may hit Rs180 in just a few weeks,” said another senior banker worried about the government’s agreement with the International Monetary Fund (IMF) regarding the exchange rate management.

Bankers were confused as to why the SBP did not intervene in the market to arrest the rupee’s slide.

The volatility in the currency market had subsided in the days prior to Eidul Fitr amid high inflows during the festive season.

Currency dealers, commenting on the rupee’s slide, said that there was no shortage of dollar since the dealers had deposited surplus dollar reserves with the banks.

The dollar, on June 3, was being traded at Rs148.50 in the interbank whereas on June 13, the same was being traded Rs153.30 — an appreciation of Rs4.80.

Among the currency dealers’ associations, Forex Association of Pakistan (FAP) quoted dollar at Rs154 on high side and Rs153.50 at low side and the Exchange Companies Association of Pakistan (ECAP) quoted the rate as Rs153.30 on high side and Rs153 on low side on Thursday.

“During the last three weeks we have sold $40 million to banks which is a good sign for higher dollar liquidity,” said FAP President Malik Bostan.

In line with the previous trend, overseas Pakistanis remit higher sums back into the country during Ramazan and Eid holidays which is expected to increase remittances by around 15-20 per cent.

“There is no visible step taken in the budget to slash imports which is also one of the reasons for higher dollar demand,” said Bostan.

Another currency analyst, while explaining the intraday fluctuation, said that with a free float regime in place, demand exceeded supply, squeezing the rupee in a thinly-traded market.

“Demand was higher than usual also because of an upcoming IMF repayment,” he said.

Rupee is especially vulnerable due to weak foreign currency reserves and wide current account deficit and traders are sceptical of any material reversal in either of these, he said.

The open market mimicked the interbank exchange rate and dollar was traded in the range of Rs152.50 and Rs153.50 for buying and selling respectively.

Reserves dip

Reserves held by the State Bank of Pakistan (SBP) plunged by $55 million to $7.807 billion during the week ended on June 3.

The decrease in dollar stock came on account of external debt servicing.

Meanwhile, holdings of the commercial banks stood at $7.019bn while total liquid reserves of the country amounted to $14.826bn during the period under review.

Published in Dawn, June 14th, 2019