KARACHI: The depreciating US dollar was finally supported by the State Bank which purchased the greenback in the interbank market and lifted its price by more than Re1 on Friday, currency traders said on Saturday.
Talking to Dawn, the currency dealers said the dollar fell to Rs155 on Friday and the market was expecting a further fall of the greenback. However, the SBP intervened through two large banks and supported the US dollar to regain its value.
Currency experts said the SBP intervention was to support exporters who claim that low return on the dollar would hit their income and would ultimately impact exports.
Meanwhile, the central bank maintained that it believed in market-based exchange rate but can intervene if it finds a disorderly situation.
In August 2020, the dollar reached a peak of Rs168.43. Since then, it has lost 7.5 per cent in value against the rupee, causing losses to exporters who keep their export proceeds for 90 days. With the falling dollar prices, exporters during the week ended on March 19 further increased the liquidity and prices fell down to Rs155 on Friday during the session.
“With the SBP buying dollars, the price quickly started increasing and even crossed Rs156.10 for the tom [tomorrow] value,” said Atif Ahmed, a currency dealer in the inter-bank market. The dollar closed at Rs155.97 on Friday, the last working day.
It has been a practice in the past that State Bank intervened in the market to bring about a balance in the exchange rate as required and justified by the government or the SBP.
However, for the last couple of years the State Bank has claimed that exchange rate is free of intervention. Bankers said the SBP never buys dollars directly from the market — instead it buys through large banks to reach the required result.
Currency dealers said exporters may retain their holdings to see the future trend of exchange rate as higher inflows could again devalue the dollar.
“The exporters can’t retain their proceeds for any longer since Ramazan is near. During the holy month, remittances increase by 15 to 20 per cent as overseas Pakistanis send more money for their families as well as for zakat and donations,” said Zafar Paracha, one of the largest currency dealers and former general secretary of Exchange Companies Association of Pakistan.
He said the exchange rate would remain in favour of the local currency due to higher inflows but any big payment like oil import bill could change the trend.
The positive impact of the depreciation of dollar was witnessed in imports sector. The value-added textile sector, which has been demanding that yarn import from India be allowed, will now find cheaper yarn in the market.
“The imported yarn is cheaper while the local producers also reduced prices,” said a cotton broker.
Published in Dawn, March 21st, 2021