SBP buys dollars to support exporters

Published March 21, 2021
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. — Dawn/File
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. — Dawn/File

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

Now you can follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Punjab crisis
01 Dec, 2022

Punjab crisis

ADMINISTRATIVE chaos has ruled Punjab ever since the ouster of the PTI government in April, deepening the...
Quetta attack
01 Dec, 2022

Quetta attack

It would be foolishness of the highest order were the authorities to ignore the emerging threat.
World AIDS Day
01 Dec, 2022

World AIDS Day

AS countries mark World AIDS Day on Dec 1, a timely report from Unicef has renewed concerns about the severe...
A call for bloodshed
30 Nov, 2022

A call for bloodshed

The state has wasted precious time by not consolidating its success in pushing TTP out of its strongholds in the north.
Missing childhoods
30 Nov, 2022

Missing childhoods

THE fact is that despite some legal efforts to end the curse of child marriage taking place in Pakistan under the...
Unemployment concerns
30 Nov, 2022

Unemployment concerns

THE ILO finding that labour market recovery from the impact of the Covid-19 pandemic in Pakistan, as in many other...