KARACHI: The rupee, after shedding 3.8 per cent on Wednesday, managed to reverse some of its losses on Friday after gaining Rs5 in the interbank to close at Rs159 against Rs164 in the previous session.
“The banks are mainly responsible for the fall in dollar prices since Friday was the closing day for them and they review their foreign currency holdings with US dollar that impacts their profits,” explained a banker.
Bank treasuries, dealing with foreign currencies, usually have about 27 currencies in their baskets. At the time of closing, they review the value of these currencies against the US dollar.
Gold prices also retreat by Rs1,900 in contrast to rising trend on the international market
If the dollar price is lower, other currencies yield higher profits whereas if banks review their basket of currencies at higher rates, they may get lower profits or losses.
However, currency dealers in the open market said the dollar gaining by Rs7 in the two days and losing Rs5 in a single session is mainly due to demand factors.
“If the demand does not increase in next session (Tuesday) the exchange rate may remain stable,” said Exchange Companies Association of Pakistan Secretary General Zafar Paracha.
Currency dealers in banks said the trading volume was relatively high on Friday since the lower rates attracted importers.
They said the greenback was traded mostly at Rs160 on Friday as it fell at the beginning of the sessions. “The tom value (tomorrow) further fell to Rs158 to Rs159,” said a currency dealer.
Earlier on Wednesday, the local currency shed its value by a whopping Rs7.2 in a single day to hit Rs164 in interbank trade — a record low — at the close of the day’s trading.
The sudden volatility in the exchange rate was widely criticised by both independent economists and media who held the State Bank of Pakistan (SBP) responsible for the rupee’s free fall.
Some currency experts blamed commercial banks for the sudden rise in dollar rates as they believe they were buying dollars during the days of stable exchange rate when it was trading at Rs157 and they sold it all in a single day when demand increased.
The SBP was reluctant to intervene in the market allowing it to settle on its own but currency experts said the situation was volatile and warranted SBP’s interference to bring stability.
Gold prices decline: The rates of one tola and 10 gram gold prices declined by a massive Rs1,900 and Rs1,628 to Rs79,600 and Rs68,244 respectively over Thursday’s rate despite a $9 increase in per ounce prices of gold in the international market.
The local prices recovered in view of the rupee’s gains against the dollar on Friday after losing its value for the last three days.
Published in Dawn, June 29th, 2019