KARACHI, Oct 24: Despite ample supply in the open market the US dollar remained stronger against the rupee, but on Monday the greenback was about to slip below the psychological mark of Rs60.

Currency dealers said that the inflows of dollars increased in the market, which pushed the greenback to gradually lose its firmness. They believe that dollar might fall below Rs60 in a week in the open market while the spread between open and inter-bank market would further shrink.

Currently, the inter-bank market offers 25 to 30 paisa less than what exchange companies offer in the open market.

“Our close monitoring of dollar movement makes it clear that the US currency will certainly shed its weight further during the month of Ramazan,” said a currency dealer.

However, the exporters are also keenly watching the rupee-dollar parity as cheaper dollar might have negative impact on exports.

“If rupee appreciates our goods will become costlier and it is killing for us especially when trade deficit has already soared to $2.4 billion in the first quarter of the current fiscal,” some exporters said.

The government, already under the shock of unexpected devastating earthquake, is frightened with the widening trade deficit, which would certainly chew its hard earned $12 billion reserves.

“If dollar becomes cheaper we can earn more dollars in terms of export proceeds, but the problem arises when our products become costlier,” said Choudhry Saleem, an exporter of finished textile products.

“We should carefully handle the exchange rate issue, as the costlier rupee can render our products uncompetitive on the world markets where China and India are already giving us tough time,” said Choudhry. The costlier dollar was also having a negative impact as the country’s imports had been registering sharp increase for last two years.

On the other hand, the currency dealers said that the central bank should continue with interfering in the market by selling and purchasing dollars to keep the exchange rate at a desired level, which is suitable for both importers and exporters.

The State Bank issued warnings to several exchange companies and had suspended a licence of an exchange company which was exploiting the market by selling dollars at higher rates.

“The State Bank should not avoid interfering in the currency market because this is the only tool which makes it easier for the exporters and importers to decide their future strategy,” said an analyst.

Pakistan desperately requires higher growth in exports to reduce the ever widening trade deficit which is shattering its current account balance. The trade deficit in the first quarter (July-September) was higher by 188 per cent to $2.4 billion.

“If the imports continue rising with the same pattern, the trade deficit will be around $9.6 billion or roughly $10 billion (just equal to SBP’s total forex holdings) which could drag the economy again on the tracks of mid 1990s when the country could hardly able to manage 6 weeks imports through its foreign exchange reserves,” said the analyst.

Analysts said that it was not oil alone ballooning the imports’ bill, but the higher machinery imports and mismatched growth in exports were also contributing towards widening of the trade gap.

“The soaring trade deficit will impact upon the reserves as remittances will remain around $4 billion, which are not enough to meet the requirement of current account balance,” said the analyst. The overseas workers during the first quarter remitted $1 billion.