KARACHI: For the first time in over 45 days, the rupee on Monday closed below 176 against the US dollar in the interbank market amid falling demand for the greenbacks.

The State Bank of Pakistan (SBP) reported the closing price of US dollar at Rs175.92.

The local currency had recovered 1.3 per cent against the dollar since Dec 29 when it hit an all-time low at 178.24, said currency dealers on Monday.

They said the measures taken by the government and the SBP to curtail imports have started yielding results. The rupee remained under massive pressure as higher imports were not only fuelling the economic growth but also increasing the trade deficit at the same time.

The latest United Nations report has forecast healthy economic growth for Pakistan in 2021 and 2022.

However, the growing trade deficit was extremely disturbing for the government as the average monthly import bill was over $6 billion during the current fiscal year.

“There is no doubt that the demand for dollars has declined to aid the rupee to recover against the US dollar,” said Atif Ahmed, a currency dealer in the interbank market.

The dollar was traded at Rs176 on Dec 1, 2021 since then it appreciated to a record high of Rs178.24 on Dec 29. The rupee recovered by 1.3pc since Dec 29.

“Passage of the SBP Bill by the parliament has boosted the market confidence which believes this will pave the way for the release of IMF tranche and other international lenders will follow suit,” said Atif, adding that the government will also be able to launch sukuk worth $1-$1.5bn on the international market.

The widening current account deficit of over $7bn in July-Nov FY22 against a $1.8bn surplus in the same period last year is posing a serious problem for the government.

Currency experts said the inflow of remittances is still strongly supporting the economy and helping the exchange rate stability. The State Bank believes that the free-float regime is helpful for the exchange rate stability despite massive depreciation of the rupee against the US dollar during the last 12 months.

“The demand for dollars is very low in the open market amid a dearth of buyers and sellers,” said Malik Bostan, Chairman Exchange Companies Association of Pakistan.

The dollar was traded as high as Rs178 in the open market. Due to rising Covid cases, he said, the buyers’ number has fallen sharply. While the SBP’s restrictions on dollar outflows, especially to Afghanistan, also aided the rupee to stay steady.

Published in Dawn, January 18th, 2022