KARACHI: The US dollar on Monday lost another Rs1.75 to close at Rs182.93 in the interbank market suggesting the situation is easing on the political horizon.

The rupee witnessed its biggest historic recovery of Rs3.50 on Friday against the dollar when the US currency fell to Rs184.68 from Rs188.18.

The ruling of the Supreme Court — which made it mandatory to hold the no-confidence vote against then Prime Minister Imran Khan on Saturday — helped defuse speculative forces yielding profits out of the crisis in Islamabad.

During the last two sessions, the rupee gained Rs5.20 or 2.8 per cent against the greenback which eased pressure on the exchange rate. The rupee had been depreciating since the beginning of March on a day-to-day basis, while the political crisis in Islamabad allowed speculative forces to get space for high-profit margins.

Bankers and currency dealers are not aware of the actual exchange rate that should prevail till the next fiscal year but said it would reflect the performance of the economy in the coming months under the new government.

“So far the situation has not changed. The pressure of demand for dollars is already there but the only thing that is absent is the uncertainty about the existence of government,” said Atif Ahmed, a currency dealer in the interbank market.

Bankers said despite uncertainty due to the political crisis, the inflow of remittances was not affected. During March, the inflows could be around the same level like February.

However, the uncertainty has hit the hot money invested in the domestic bonds by the foreign investors. Over $300 million was withdrawn from the treasury bills and Pakistan Investment Bonds during the last one-and-a-half months.

Bankers dealing in currencies are hopeful that the exchange rate would stabilise in the coming days but were not sure how long the new government could come out with economic policies or short-term decisions to support the local currency.

Most analysts and researchers believe that the new government would increase the petroleum prices to increase revenue, while concessions given on electricity would also be withdrawn. These measures could trigger inflation and could hurt the exchange rate as the increased price of dollars compels exporters to keep their dollars out of the country for longer periods.

Published in Dawn, April 12th, 2022