KARACHI, Feb 15: The US dollar on Friday breached psychological barrier of Rs63 posing serious threat to the exchange rate mechanism and creating more space for further upward movement.
While shortage of greenback was the real cause for higher demand and appreciation of the dollar but the dealers said the main factor was the uncertainty attached with the coming general elections scheduled to be held on Feb 18.
The market is already overshadowed by elections as most of the dealers and money changers said that situation would not improve unless elections are held and the fog of uncertainty is removed.
“We traded dollar at Rs63.12 and closed at Rs63.09,” said Ubaid Shariq, a currency dealer. “It will not stop here as all efforts by the State Bank to check dollar’s appreciation against the rupee have failed,” he said.
The State Bank has so far pumped several hundred millions dollars into the market to stabilise the exchange rate but the shortage was much greater than the supply.
Since the imposition of emergency, which was the real cause of uncertainty and weakening of economy, the SBP lost over a billion dollars as its reserves depleted.
Currency dealers said exporters were not selling their dollars into the market and are keeping them abroad. He said the SBP might not pump more dollars as the demand was very high, which means more depreciation of rupee in the coming days and weeks.
“Our deals for dollar trading have drastically shrunk as the currency is not available,” Obaid said.
The dealers said the importers or the higher demand were not the only factors behind appreciation of dollar against the weakening rupee, it was the supply which dried up. They said hoarding of dollars was clearly visible. The State Bank should intervene in this situation, they suggested.
Money changers said for the last three days dollars disappeared from the open market. A banker said he could not even buy $500 from the open market despite offering higher than the quoted rate.
Hanif Ghaffar, a money changer, said no seller of dollars is coming into the open market and their business has dropped. Most of the business in open market revolves around dollars, either for selling or buying.
“I believe the general public is also involved in hoarding of dollars and this could be the result of elections,” Hanif said. He said there was a general perception in the public that dollars should be kept for ‘unforeseen’ scenario, which may appear after the elections.
Despite some fall in the foreign investment inflows, remittances remained high with an average of $500 per month. Last year, the country received about $5.5 billion in remittances.
