KARACHI: The dollar continued its downward trend against the local currency on Friday as it lost 4.2 per cent since August reflecting the improvement in external indicators.

The dollar was traded at Rs161.37 losing 45 paisa after depreciating throughout the week.

Bankers dealing with the currency markets said the dollar may further fall in the coming weeks.

Cumulatively, the dollar has lost over Rs7, or 4.2pc, from Rs168.43 in August.

Currency experts in banks and open market said the rupee has gained due to improved data of external account which increased the foreign exchange reserves of the country while the demand was also down.

However, they said the Financial Action Task Force’s decision to keep Pakistan on its ‘grey list’ for next four months may put some pressure on the local currency.

The FATF asked the authorities to comply with the remaining six items on the proposed action plan.

“The dollar is coming down against the rupee due to several reasons including the improved external indicators like current account surplus and lower outflow from the country,” said Forex Association of Pakistan President Malik Bostan.

He believes that the US dollar may further decline up to Rs160 in the coming weeks.

Currency dealers also identified that low public demand for US dollar in the open market caused a depreciation of dollar.

The dollar was traded as low as Rs161.80 in the open market on Friday. The local currency recovered Rs7.20 since August.

“The remittances have supported the exchange rate parity while the first quarter current account surplus provided a psychological support to the local currency against the greenback,” said Exhange Companies Association of Pakistan’s former general secretary Zafar Paracha.

However, some exporters found the rupee’s appreciation eat into their profits as the export proceeds in terms of rupees are declining.

“The falling dollar price is helpful for the country but the exporters would suffer as their export proceeds would decline but it is too early to believe that the current exchange rate is sustainable,” said Aamir Aziz, an exporters of textile made-ups to Europe.

He said the exports would continue to improve as the government has been providing a number of incentives including cheaper money to boost exports; export would help to increase the reserves of the country, he said.

The foreign exchange reserves of the State Bank of Pakistan (SBP) are over $12 billion reflecting a relatively improved condition for the stabilisation of exchange rate, he said.

SBP reserves rise to $12.066bn

Foreign exchange reserves of the SBP increased by $268 million due to foreign inflows during the week ended on October 16, reported SBP on Thursday.

The reserves of the State Bank rose to $12.066 billion. Meanwhile, the reserves of the commercial banks also increased to $7.235bn during the same week.

Resultantly, the country’s total reserves increased to $19.301bn.

Published in Dawn, October 24th, 2020