KARACHI: The US dollar gained 91 paisas against the rupee on Tuesday to close at a record high of Rs167.90 in the interbank, from opening value of Rs 166.99.

Since the imposition of lockdown across the country, the exchange rate has witnessed some volatility which prompted the State Bank of Pakistan to intervene as well. Pressure has been mounting on the exchange rate since the outbreak of Covid-19 in Pakistan which has intensified after the lockdown, forcing the local currency to lose on almost a daily basis against the greenback.

Since March 20, the dollar has gained 5.8 per cent or Rs9.23 over closing rate of Rs158.67

According to currency experts, the pandemic caused serious damage to international trade with the country witnessing an early negative impact in terms of orders. “The exports have fallen as a result which means shortage of proceeds that in turn has pushed up the demand for dollars,” said President Forex Association of Pakistan Malik Bostan.

Though the dollar started its upward journey against the rupee with the rising number of coronavirus patients in the country, the cut in interest rate further accelerated the increase.

The SBP has twice slashed the policy rate in the third and fourth weeks of March by a cumulative 2.25pc to bring it down to 11pc.

This rate cut made the domestic treasury bills less attractive to foreigners, prompting them to disinvest their holdings.

In March alone, around 60pc of the hot money (about $2 billion) was withdrawn which hurt the currency market sentiments. The shaking confidence was further accelerated by foreign selling of equity at the Pakistan Stock Exchange.

Currency dealers said the foreign exchange reserves of the country have been falling, especially those of the SBP which have declined by $1.5bn over the past few weeks, further unnerving the investors.

Meanwhile, the open market was closed due to the lockdown but now it has resumed operations in ‘safe’ areas across the country. “With the permission of the SBP and provincial home ministry, we have opened branches on Monday only for remittances; no other public dealing is carried out,” said Bostan.

Currency dealers in the open market are also the source of remittances from abroad but inflows are limited. “On Monday, about $10 million in remittances was received,“ said Bostan, adding that the entire amount was deposited in banks since exchange business is closed these days.

Published in Dawn, April 8th, 2020