SBP moves fail to check ru­pee fall

The Pak Banker - - Front Page -

KARACHI

Cur­rency ex­perts have warned of brew­ing bal­ance of pay­ments cri­sis as State Bank of Pak­istan's ef­forts to lend sup­port to fall­ing ru­pee failed de­spite pump­ing dol­lars in mas­sive amounts into the in­ter-bank mar­ket this week. "In the last five work­ing days of this week the State Bank pumped nearly $200 to $225 mil­lion into the in­ter-bank mar­ket to check value ero­sion of lo­cal cur­rency but it could hardly re­cover 40 to 50 paisa against the US dol­lar," said Atif Ahmed, a cur­rency dealer.

He said the cen­tral bank sold dol­lars twice in the in­ter-bank mar­ket dur­ing the week to check the dol­lar's rise, but the move proved tem­po­rary as the US dol­lar again started ap­pre­ci­at­ing against the ru­pee.

Last week the dol­lar crossed all bound­aries to set record at Rs96.30 which prompted the State Bank to halt the sharp ris­ing trend of the green­back.

The dol­lar was traded at Rs95.98 on Fri­day while it was traded at Rs95.65-70 af­ter the in­jec­tion of dol­lars by the SBP.

Mar­ket sources said de­mand for dol­lar was still high while at least three banks on be­half of the State Bank pumped dol­lars in the mar­ket to cool down the ag­gres­sive mood of the US cur­rency.

The price sud­denly fell by nearly 50 paisa but the ex­change rate again tilted in favour of the green­back. "Now the un­cer­tainty is high. The rates are not sus­tain­able for a longer pe­riod par­tic­u­larly in the wake of melt­ing dol­lar re­serves and heavy debt pay­ments due in com­ing months," said An­war Ja­mal, a lead­ing cur­rency dealer.

Cur­rency deal­ers both in the in­ter­bank and open mar­ket said the lat­est dol­lar surge was also due to pay­ment of an­other in­stall­ment to the IMF this month.

When con­tacted the State Bank said the coun­try would pay 258.4 mil­lion SDR (spe­cial draw­ing rights) that would be equal to around $400 mil­lion to the IMF on 23rd of this month.

The coun­try's for­eign ex­change re­serves fell to $13.84 bil­lion in week ended Novem­ber 9, with the cen­tral bank's re­serves at just $9.24 bil­lion and com­mer­cial banks at $4.6 bil­lion.

An­a­lysts said the dol­lar is gain­ing value due to nu­mer­ous fac­tors in the in­ter­na­tional mar­ket as well as against Pak ru­pee. One of the most im­por­tant fac­tors was the per­sis­tent debt and fi­nan­cial cri­sis in Euro­pean Union which has weak­ened the euro, paving way for the dol­lar to gain.

Ja­panese yen have been un­der pres­sure be­cause of weak­ness of its econ­omy while Chi­nese are ben­e­fit­ing by keep­ing the low price of Yuan to boost their ex­ports.

These two fac­tors also have help0ed strength­ened the US dol­lar.

"Pres­sure is also felt in open mar­ket as de­mand is high, sup­ply is low and the price dif­fer­ence be­tween the open and banks' mar­ket has been in­creas­ing," said Ma­lik Bostan, Chair­man Ex­change Com­pa­nies As­so­ci­a­tion of Pak­istan.

How­ever, he said the ex­change com­pa­nies were still de­posit­ing 80 per cent of their for­eign cur­ren­cies in the banks which mean con­sumer de­mand is not so high. Cur­rency deal­ers said economists have been pre­dict­ing that by end of this fis­cal year Pak­istan could have less than $5 bil­lion in its ac­count, if the in­flows through IMF or other donor agen­cies do not start dur­ing the year.

"This is haunt­ing for the cur­rency deal­ers and en­cour­ag­ing hoard­ers to keep sit­ting on dol­lars for a 'good deal'," said An­war Ja­mal.

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