KARACHI: The US dollar appreciated by 94 paise on Friday against the rupee in the first session after Eidul Fitr holidays in the interbank market amid strong demand for the greenbacks.

However, currency dealers said the dollar inflows increased by 15 to 20pc during Ramazan, a normal phenomenon in the holy month.

The State Bank of Pakistan (SBP) reported that the dollar price rose to Rs186.63 on Friday from Rs185.69 on April 30.

The interbank market opened after a week’s long Eid holidays, but the rupee remained under pressure as the market sentiment did not show any positive change.

Despite higher remittances and over $4bn inflows through Roshan Digital Account, the US dollar continued its rising streak against the local currency.

Market experts believe that a steep decline in the SBP foreign exchange reserves over the last few months and a persistent strong demand for dollars from importers put the rupee under constant pressure.

“The trade deficit widended by 65pc during the first 10 months of the current fiscal year is a clear indication that the demand for dollars will remain high,” said Zafar Paracha, General Secretary Exchange Companies Association of Pakistan (ECAP).

He said this the rupee-dollar exchange rate has constantly been under severe pressure due to the surging trade deficit. “The strong demand for dollars will further weaken the rupee in coming days unless the government takes some effective measures to curtail the demand for greenbakcs.

Bankers said that the reports about the possible continuation of the $3bn Saudi deposit in the State Bank account could not change the sentiments.

“The new prime minister has requested the Saudi government not to withdraw the deposit amid hopes of a positive response from the Saudi government. However, the dollar appreciated further against the rupee,” said Atif Ahmed, a currency dealer in the interbank market.

Exchange Companies Association of Pakistan chairman Malik Bostan said the inflows during Ramazan increased by up to 20pc but the data would be available next week.

“Normally, 15 to 20pc increase in the inflows is recorded each year due to charity and higher expenses in the holy month and Eidul Fitr,” said Bostan.

SBP reserves fall

The foreign exchange reserves of the SBP fell by $59m to $10.5bn during the week ended on April 30. The holdings of the commercial banks were $6.054bn while the country’s overall reserves were $16.553bn during the week.

Published in Dawn, May 7th, 2022