KARACHI: Falling dollar price is sparking a flight into the rupee as growing numbers of people are selling their holdings in the open market. As a result exchange companies say they are depositing up to $300 million per month into the banks.

The US dollars are being sold at below the prevailing rates in the interbank market. The State Bank of Pakistan (SBP) reported that the interbank rate at Rs158.33 but the bankers said the price was even lower.

The Exchange Companies Association of Pakistan (ECAP) quoted Rs158.10 to Rs158.20 in the interbank while buying and selling rates in the open market at Rs157.80 and Rs158.20.

“Since the dollar has been falling on day-to-day basis the savings of Pakistanis started coming in open market which further created pressure on the exchange rates,” said Malik Bostan, President Forex Association of Pakistan.

Exchange firms depositing $300m a month in banks

“The liquidity is so high that we are depositing on average $10m to $12m per day in the banks. Buyers are extremely thin in numbers,” he added.

He said the exchange companies deposited $290m in the banks in September. During the first quarter of this fiscal year these companies on an average deposited about $300m per month.

Remittances grew 26 per cent during July-October period of this fiscal year and this higher liquidity both in interbank and open markets was helping the local currency to recover against the US currency which has lost Rs10 since August.

Some currency experts said the dollar may lose more value against the rupee if the inflows remain high and the reserves of the State Bank improve.

They said due to increased cases of Covid-19, the outflow of dollars from Pakistan would remain low till the end of third quarter of this fiscal year.

Published in Dawn, November 14th, 2020