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KARACHI, July 12: The US dollar finally settled below Rs60 in the inter-bank market on Friday as the State Bank made no attempt to stop its fall. In the last fiscal year ending in June the SBP used to start dollar buying to keep it stable at Rs60 whenever it fell below this level—seen crucial from the exporters point of view.
Senior bankers said the greenback closed at Rs59.85/Rs59.87 against the previous close of Rs60.04/Rs60.06 for ready buying and selling.
“Since the central bank did not come to defend dollar when it slipped a few paisa below Rs60 exporters started panic-selling pushing the greenback further down,” said treasurer of a state- run bank. He said some banks that were long in dollars also made big selling anticipating that the troubled US unit might decline further.
“The shortage of rupee liquidity in the market also provided an additional reason to the bankers to sell dollars for rupees.”
Treasurer of a foreign bank said the fall of the dollar was very much expected after corporate debt payments of more than $90 million earlier this week. “Banks had over-bought greenbacks for debt servicing on behalf of their corporate clients. So once the payments were over the dollar had to come down,” said the foreign banker.
The corporate debt payments made earlier this week included a big $46 million by Hubco.
EXPORTERS: The slipping of the dollar below the crucial level of Rs60 made exporters nervous but unlike in the past they took a more practical view of the situation. “Exporters are going to suffer,” said chairman of All Pakistan Textile Mills Association Nadeem Maqbool. “But we must also realize that a stronger rupee makes imports cheaper and helps in balance of payment,” he said.
The APTMA chief said it would be too early to say that the SBP had stopped defending the dollar around Rs60 “as the dollar has traded below this level for only today.” But he said that Finance Minister Shaukat Aziz had told him that the government would keep the dollar stable around Rs60 though its real value was lower. “I am not aware of any change in the policy,” he said when asked by Dawn whether the exporters had got any indication that the central bank would no more defend the dollar at the said level.
“Lately the dollar has weakened in the world markets. Its fall in the local market should also be seen in that context,” Maqbool said — somewhat relaxed.
NEW DEFENCE LEVEL: Central bankers made no comment on whether the State Bank had stopped defending the dollar at Rs60 and if so what is the new level at which the SBP would try to hold the US unit stable.
But sources close to the central bank said the SBP officials had set a new defending level for the greenback but they would not disclose it. Senior bankers said they believed that the SBP would still defend the US currency somewhere between Rs59.50 and Rs59 for the benefit of the exporters.
Foreign Exchange Adviser of SBP Zafar Shaikh made no comment on whether the Rs60 level set for defending the rupee has been changed but he claimed that the rising value of the rupee showed growing confidence of the public in the local currency. “In the last fiscal year the rupee appreciated by 6.25 per cent in the inter-bank market as the economic fundamentals of the country improved,” he said when reached by Dawn over telephone. “This has given a boost to the public confidence in the local currency.”
THIRD CURRENCIES: Zafar Shaikh said whereas the rupee gained 6.25 per cent against the US dollar in fiscal July/June 2001/02 it depreciated sharply against the euro, the British pound sterling and the Japanese yen.
“So on balance the exporters got some benefit at the end of the day,” he said.
Pakistan bills more than $60 per cent of its exports in the US dollars and less than $40 in all other major currencies. That explains why the exporters have always been for a weaker rupee against the dollar.
KERB MARKET: In the kerb market the rupee gained 18 paisa for selling on Friday. It closed at 59.90/60.00 to a dollar against the previous close of 60.13/60.18.
“The rupee rose in the kerb market mirroring its gain in the inter-bank market,” said president of Forex Association of Pakistan Malik Bostan.
