Rupee makes fresh gains against dollar

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KARACHI: The dollar’s slide against the rupee continued on Friday as the US currency traded as low as Rs96.10 in the inter-bank and Rs98.20 in the open market. Currency dealers in the inter-bank market said banks were suffering losses because of the unpredictable exchange rate and saw no end to dollar depreciation. “We traded the dollar at Rs96.10 and closed the trading at Rs96.20-30,” said Atif Ahmed, a currency dealer in the inter-bank. He said dollar inflows were very high despite regular payments, including for oil, by the private sector.

Bankers attribute the higher inflows coming into the market of export proceeds, higher remittances and loans and payments coming from bilateral and multilateral sources.

“We are only thinking of the dollar’s slide as the rupee has appreciated by 13 per cent over the past few months. There is no sign yet that the trend will change soon,” Atif Ahmed said.

The successful launch of Eurobond by Pakistan, which fetched $2 billion instead of an estimated $500 million, put enormous pressure on the exchange rate.

“No one was expecting that Eurobond would fetch $2bn. This has put pressure on the dollar. Moreover, the auction of 3G telecom licence may bring more foreign inflows. Investors are selling the dollar because they see foreign exchange reserves at the higher side,” said Mohammad Sohail, CEO of Topline Securities.

The open market also saw a sharp reduction in the value of dollar as it lost Rs1.5. The greenback declined to Rs98.20 and at some places even below Rs97.50. There were no buyers and exchange companies deposited most of their holdings in banks.

Malik Bostan, Chairman of the Exchange Companies Association of Pakistan, said the dollar might stay at Rs95 in the open market, but it was difficult to say for how long.

Analysts and currency watchers cautioned that the rupee’s sudden appreciation could be dangerous for export and export-related industries. “This year we saw a 10 per cent depreciation of the rupee and now a 13pc gain. The extreme volatility can ruin businesses,” said Eman Khan of Aerari, an application that tracks currencies.

The government should not take the sharp appreciation of rupee as a positive indicator.

“The extraordinary rally should be sending distress signals to high-ups if we are to protect our industries,” said Faisal Mamsa of Landmark Capital.