KARACHI: The rupee in open market rose to its five-month high as demand for the greenback fell owing to the decline in imports whereas the increase in dollar from lending agencies and foreign investment in the government papers helped stabilise rupee-dollar parity.

Currency dealers foresee rupee to rise further in coming months in the wake of higher inflows of dollars and increased attraction of local currency.

The dollar traded as low as Rs154.70 in the open market on Saturday which was much lower compared to Rs164 on June 26 this year.

“We traded dollar at Rs154.70 as lowest and Rs155 as the highest rate during the day. These were lowest prices since it touched Rs164,” said Forex Association of Pakistan President Malik Bostan.

The dollar scaled new peak on June 26 after it hit Rs164 mark in the open market but soon started falling against the rupee. The rupee has appreciated by 5.67 per cent against the dollar since June this year.

Currency dealers said the gradual appreciation of rupee helped stabilise exchange rate which remained range bound in the Rs155-156 bracket for the last few months.

The stability can be attributed to steady exchange rates in the inter-bank market which showed the dollar price at Rs155 on lower side and Rs155.10 on higher side on Friday.

The dollar in the open market usually trades above the inter-bank rates but for the last couple of months, the open market rates have treaded closer to the inter-bank rates.

“One of the biggest reasons is that the country has come out from huge current account deficit of $20 billion in FY18 and now[in] October, [it] posted a surplus for the first time after four years,” explained Bostan.

He said both risk and attraction for dollar investment has gone. Now those holding dollars are liquidating them to get rupee and benefit from the much higher returns on the local currency deposits. Due to high policy interest rate of 13.25pc, the local currency investors could get double-digit returns on long-term deposits.

Currency dealers at banks said the frequent inflows from International Monetary Fund, the Asian Development Bank and lower outflows for imports have reduced dollar demand. Importers are not eager to get forward booking, said a banker dealing in foreign currencies.

The country has reduced its import bill with slight improvement in exports helping the country’s foreign exchange reserves to remain stable.

The import bill would further decline during the current fiscal year as Saudi Arabia activated its $3bn deferred oil facility for the next three years from July.

Currency dealers said the government has now realised that the rupee was devalued more than the requirement of free market. The market forces have now started setting the real exchange rate, they said.

Published in Dawn, December 8th, 2019