Currency dealers sell $2.4bn to banks

Updated November 10, 2019

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Rupee shows slight recovery despite sharp fall in dollar demand.
Rupee shows slight recovery despite sharp fall in dollar demand.

KARACHI: The open market currency dealers said they have sold $2.4 billion to the banks in last twelve months while increase in inflows is likely to surpass the selling target of $3.5bn for the ongoing fiscal year.

They said that since September last year, they sold $1bn more to banks increasing the total to $1.4bn.

Amid slow and gradual appreciation of the rupee against dollar, currency traders believe the exchange rate may see big change once the country comes out of grey list in next review of the Financial Action Task Force (FATF).

The local currency gained about Rs80 paisa in a month against dollar which was being sold as low as Rs155.20 on Saturday in the open market. In the inter-bank, the dollar was being sold at Rs155.40 on Friday – last day of the week.

Bankers said the gradual declines in dollar are mainly on account of falling demand for the greenback from importers. “The inflow of dollars has increased while outflow is low which is visible in the large decline of current account deficit,” said a banker.

The open market, which follows inter-bank rates, witnessed 95 per cent fall in dollar buying.

“The buyers have almost disappeared due to many reasons but mostly on account of tight monitoring of the foreign currency buyers,” said Forex Association of Pakistan President Malik Bostan.

He said the investment in greenback lost attraction particularly due to high interest rates which have pulled the local currency deposits.

“There are only sellers in the currency market. I believe once the country comes out from the grey list, the selling would be much higher as many people still hold dollars due to looming FATF decision, Kashmir issue and the recent political sit-in at Islamabad,” said Bostan.

The open market is currently selling $10 million dollars to banks every day. “We have sold $1.2bn during June to Sept,” said Bostan.

“I believe we can sell up to $4bn to banks in FY20,” he added. The amount is significantly higher than the target of $3.5bn set by currency dealers for ongoing fiscal year.

The current account deficit, which was about $13bn in the last fiscal year, is likely to reduce further in the current fiscal year.

The government has vowed to bring down the deficit by about $7bn which would be landmark success since the country has been facing serious threat of default in the presence of $20bn current account deficit in FY18.

Published in Dawn, November 10th, 2019