KARACHI: The exchange rate further strengthened in the outgoing week as dollar kept falling against the local currency declining to eight-month low in the open market. The relentless declines of recent weeks has driven the rupee closer to the value it was at during the opening weeks of 2020.

The dollar in the open market fell below Rs158 on Saturday but in the inter-bank, which closed on Friday, remained slightly above Rs158.

“The uncertainty emerged after elections in the United States weakened the US dollar internationally,” said Malik Bostan, President Forex Association of Pakistan.

Among other international currencies, the Euro, priced at $1.17 on Oct 1 has reached to $1.18 on Nov 14. Similarly, the British pound priced at $1.29 on Oct 1 has reached to $1.31 on Nov 14.

During the week, dollar inflows remained high creating a surplus in the open market. As per reports, exchange companies are depositing $12 million into the banks every day.

While currency dealers and experts predict further appreciation of the rupee against dollar, some bankers said the local currency has gained due to higher remittances and impact of Covid-19 on global markets. The rising cases of Covid-19 in US, Europe and Pakistan could reduce exports earnings.

However, since the peak of dollar rates in last week of August, the exchange rate has gradually stabilised.

The open market on Saturday was selling dollar at Rs157.80. The price was even lower at Rs157.50 on Friday.

The State Bank of Pakistan (SBP) takes credit for the stabilisation of exchange rate. SBP Governor Dr Reza Baqir has claimed that the central bank played a key role to facilitate higher remittances and its free market mechanism has helped stabilise the exchange rate. In various fora, he has claimed that this is the first time the rupee has moved in both directions, rising as well as falling, which he says is evidence that the exchange rate is now market determined.

The remittances into the country increased by over 26 per cent in the first four months of the current fiscal year while the outflow from the country was much lower than the average outflow of last year.

This low outflow increased liquidity in the banking system helping the local currency to improve its value. Rupee’s appreciation has forced those holding their savings in dollars to sell the greenback in the open market.

Currency dealers said that on average per day $4-6m is being sold in the open market by Pakistanis including currencies like Saudi Riyal, British pounds etc.

Published in Dawn, November 15th, 2020