KARACHI, May 9: The killing of sixteen people including twelve French nationals on Wednesday has made no visible impact on foreign exchange market. But bankers say a sudden fall in foreign investment is almost inevitable.

The rupee closed at 60.12/60.14 to a US dollar in the inter- bank market on Thursday down two paisa from the Wednesday close of 60.10/60.12. In the open market the rupee lost five paisa on Thursday to finish at 60.25/60.35 for spot buying and selling.

More than half a dozen bankers reached by Dawn over telephone said the demand for dollar had not increased after the Wednesday suicide bombing in Karachi.

“I can confirm to you there has been no unusual demand for dollar. Rather inflows are high,” said treasurer of a leading foreign bank. “There is no panic from the importers...and the exporters are also not holding dollars,” said treasurer of a big local bank.

But both the bankers said the Wednesday incident had shaken the investors confidence adding that both portfolio and direct foreign investment might fall in the days to come.

Pakistan attracted $287.4 million foreign direct investment in July/March 2001/02 up from $232.3 million a year ago. Portfolio investment also improved: In July/March 2001/02 net inflow of portfolio investment stood at minus $2.9 million. In a year-ago period the figure stood around $128.3 million.

The bankers said the reason why the foreign exchange market has seen no panic after the Wednesday killing is that most importers have a favourable view of the exchange rate in near future. Their analysis seems right:

“We believe that the rupee-dollar parity is stable and there are least chances of the rupee falling in the days to come. Why should we then buy forward dollars,” said chairman of Pakistan Commodity Traders Association Raees Ashraf Tarmohammad. “Most importers had suspended forward dollar buying much earlier when they realized that the exchange rate was not only stable...but the government was rather keeping dollar strong for exporters.”

Leading money changers said the open foreign exchange market also operated quite smoothly after the Wednesday killing. “The rupee-dollar parity is not going to see much change in the wake of the suicide bombing,” said Ovais Kalia of Khanani & Kalia International—one of the leading money brokerage houses.

He agreed with Dawn that overseas Pakistanis might send lesser amount of foreign exchange through kerb market for investment purposes in the wake of the killings but hastened to add “this would be a temporary phenomenon.”

Bankers and money changers said though the foreign exchange regime has been liberalized to a big extent yet chances for capital flight are least as the country on balance has been performing well on economic front.

MONEY MARKET: Whereas calm prevails on the foreign exchange market there are indications that after the Wednesday killing banks have started holding cash anticipating faster withdrawal of rupee deposits. Senior bankers estimated that the money market was surplus by Rs2-4 billion but they said most banks were preferring to hold cash instead of lending their surplus liquidity into inter-bank market. “I suppose banks are doing this anticipating withdrawals from rupee deposits,” said treasurer of a major foreign bank.