KARACHI: The State Bank of Pakistan on Friday reported the closing price of the US dollar at Rs277.62 in the interbank market, a depreciation of 96 paise against the rupee.

Meanwhile, the open market reported the dollar price at Rs277 compared to Rs278 a day earlier, a decline of Re1.

This daily decline has become a routine matter for both the banking and open markets. The open market apparently has ample liquidity, which ultimately goes to banks and improves their foreign exchange reserves.

But when asked about the reason for this steady decline, bankers point to the central bank, saying that it sets the daily dollar rate for banks to follow.

But the SBP has a different point of view, stressing that the interbank currency trade is guided by a market-based exchange rate, based on supply and demand dynamics.

“The day-to-day decline in the dollar rate is simply the outcome of supply and demand of dollars in the interbank market,” SBP’s chief spokesman Abid Qamar told Dawn.

However, bankers still insist that the central bank is guiding the steady decline. They point to the fact that SBP is now the biggest buyer from the banking market, purchasing foreign exchange through forward booking by offering a slightly higher rate than the ready rate, despite the dollar having declined each day.

Bankers Dawn spoke to said exporters had already sold their future dollars at ready or forward rates. “The two-month forward is being offered at Re1 per dollar more than the ready rate, which is highly attractive for exporters witnessing a daily decline in the exchange rate,” said Atif Ahmed, a currency dealer in the interbank market.

“Despite the higher supply of dollars, the pressure on exchange rate is still there, particularly as demand from importers is increasing each day,” he said.

Currency dealers said an increase of 5.3 per cent in remittances in September was a positive sign after a declining trend for a long time.

Published in Dawn, October 14th, 2023