KARACHI: The rupee witnessed pressure on Monday after a period of relative calm for the past six months, as it fell by Rs3.65 against the dollar to Rs157.9 in the interbank market.

This represented a jump of 2.36 per cent as compared to dollar trading at Rs154.25 on Friday, according to rates provided by the Exchange Companies of Pakistan.

By mid afternoon, the dollar had hit Rs156.58, representing gains of Rs2.33 or 1.51pc.

Meanwhile, in the open market, the greenback rose by Rs2.70 to Rs157 from Rs154.3. In percentage terms, this meant an increase of 1.75pc.

“For the past few days, foreigners have been unloading their positions in the stock market [$16.7 million last week] and repatriating back the dollars, which has put pressure on the interbank rate,” said Exchange Companies of Pakistan former general secretary Zafar Paracha. “There is no fundamental change behind the sudden increase in greenback and is part of the general panic in markets worldwide due to the coronavirus. But given the State Bank’s strong control mechanisms, it would be back within a few days,” he adds.

Forex Association of Pakistan’s President Malik Bostan endorsed this view, attributing the sudden demand in dollars in the kerb market to foreigners selling their equity in the local bourse. “This is a temporary phenomenon and should reverse in a few days,” he said.

A look at the recent data on the external front puts weight behind their thesis. Not only have the foreigners continued to invest in local papers, taking their holdings to $3.1 billion as of February end, reserves held by the State Bank also increased by $166 million to $12.757billion during the week ended on Feb 28.

Moreover, the remittances have also maintained their upward trajectory as they grew by 4.13pc to $13.3bn during July-February 2019-20. Most importantly, the current account deficit — the primary contributor to the massive balance of payments crisis — plunged by 72pc to $2.654bn in the same period, as compared to $9.479bn in 7MFY20.

The downturn in rupee is part of a global trend triggered by the outbreak of coronavirus, which led to the dollar diving against the euro and the yen due to falling yields. Similarly, the Russian rouble and the Australian and New Zealand dollar all declined as well.

Local gold prices rise

Despite a $9 per ounce plunge in international prices to $1,666 on Monday, the local traders increased prices of 10-gram and one-tola gold by Rs600 and Rs700 to Rs81,618 and Rs95,200.

According to BIPL Research, gold prices fell one per cent on Monday as investors booked profits after the yellow metal rose above the $1,700 per ounce level for the first time in more than seven years on fears of a deeper economic fallout from the coronavirus outbreak.

BIPL said a Reuters poll showed that the virus, which has now infected more than 110,000 people worldwide, likely halved China’s economic growth in the current quarter compared with the previous three months. Markets are expecting another rate cut from the U.S. Federal Reserve at its policy meeting on March 18, following last week’s emergency easing.

All Pakistan Jewellers Associaton President Mohammad Arshad claimed that gold rate in Pakistan is under cost by Rs 3,200 per tola than Duba keeping in view exchange rate parity. He said rupee had depreciated on Monday against the dollar, thus putting extra pressure on local gold rates.

He said local markets are facing dearth of buyers of jewellery in peak marriage season during Rajab and Shaaban as high prices had gone beyond reach of many people.

On the contrary, All Sindh Sarafa Jewellers Association (ASSJA) claimed that domestic gold rates are Rs2,500 per tola cheaper than Dubai.

Published in Dawn, March 10th, 2020