KARACHI: The US dollar kept going high against the rupee hitting a fresh peak despite a number of measures taken by the State Bank of Pakistan (SBP) to cool down the demand for the greenback.

Currency dealers in the interbank market said the dollar was traded as high as Rs171.13 during the session on Tuesday. However, it closed at Rs171.04, the SBP reported.

“The exchange rate deterioration is much faster than market expectations. It is difficult to assess what would be the next day price,” said Atif Ahmed, a currency dealer in the interbank market.

However, despite these steps the rupee kept declining almost each day. Market dealers said there is no intervention from the SBP — it is selling not dollars to support the local currency.

The SBP has put some curbs on import of luxury vehicles and restricted Afghan nationals to take away just $1,000 and the total yearly limit has been fixed at $6,000. Besides, the central bank has also imposed 100pc cash margin on opening of letters of credit for import of over 500 items.

“The State Bank influences the market through verbal instructions which do not work more than a day while it also purchases dollars from the interbank market,” said Mr Atif. Bankers said the strong demand for dollars has mounted pressure on the local currency for further devaluation.

“Despite higher inflows the banks’ dollar deposits have been declining for the last couple of months reflecting higher outflows from the country,” said another banker. He said the country’s import bill would remain high due to soaring prices of commodities especially oil and gas on the international market.

Bankers said further steps are required to bring down the import bill which is the main reason for higher dollar demand. Pakistan received record $8 billion remittances in 1QFY22 while exports also showed significant increase, but the impact of these positive reports was not visible in favour of rupee.

The currency dealers in the interbank market said New York was closed on Monday due to holiday so the supply from the US was discontinued for the last four days (Saturday to Tuesday).

Crackdown against hoarders

The government machinery is in action to trace all those people who have bought dollars for saving in view of bullish price trend which could be one reason for pushing up the demand for greenbacks.

However, these dollars are purchased from the open market through currency dealers and buying is legal even for saving purposes, said Malik Bostan, Chairman Exchange Companies Association of Pakistan (ECAP), while denying this impression. “This is a wrong impression because there has been no buyers since March 2020 due to Covid-19 which also hit the exchange rate as few people went abroad for tourism, education, Umrah or heal­thcare facilities,” said Mr Bostan.

After the change of regime in Kabul, the trading in the open market increased and it was reported that the Afghan nationals were buying and smuggling out dollars from Pakistan.

Published in Dawn, October 13th, 2021