The State Bank of Pakistan (SBP) has no “formula” as the local dollar-hungry currency market is desperately looking at the regulator for the injection of at least $ 15 to $ 20 million to bridge the supply demand gap that emerged in the wake of renewed Pak-America fiasco.
According to currency dealers, despite holding Monday an emergency meeting with the exchange companies and pledging intervention therein the central bank was still undecided on the ‘formula’ under which it would be pumping dollars into the open market where the liquidity crunch ranges from $ 5 to $ 10 million. Unlike the open market, the inter-bank market remained stable with value of a dollar in Pak rupee standing firm at 87.6 on account of, what the currency dealers said, intermittent interventions of the State Bank in the face of massive dollar pumping. According to dealers, the dollar-rate difference between the inter-bank and open market, however, stood at Rs2.
SBP chief spokesman Syed Wasimuddin, however, remained tightlipped on the question whether or not the regulator was injecting dollar into the money market to stabilize the rupee-dollar parity. “The central banks across the world do inject liquidity into their markets without (officially) declaring it,” the spokesman told Pakistan Today.
With poor foreign inflows, the rupee has been in hot waters since the troubled Pak-US diplomatic relations has once again started worsening.
During last week, the rupee devalued by more than Rs2 against the greenback with Monday seeing Pak rupee depreciating to a record low, raging from Rs90.60 to Rs91. Currency dealers attribute the head-on dip to multiple factors that shot the demand up to $ 20 million on the local money market on Monday. “Yesterday the demand for dollar (on the open market) was around Rs20 million against the $10 million supply,” said Malik Bostan chairman Exchange Companies of Pakistan. The ECP chief, who led the exchange companies in Monday’s meeting at the SBP, said the money exchangers had helped the rupee stabilize against the dollar Tuesday after their “deliveries” from New York had arrived. “We sold some 8 to 10 million dollars today at a relatively stable Rs89.50 using our New York deliveries.”
“The banks like Standard Chartered also rushed for massive buying of dollar at Rs91 from the open market to cater their credit cards financing, they should have gone to the State Bank,” the dealer said. In addition, supply side had seen some improvement on Tuesday as the money exchangers had done advance sale for the day. But, Bostan said, the open market was still awaiting the SBP’s help to bridge the huge demand that, he said, arose for multiple reasons including the worsening Pak-US ties, extensive buying of at least $1,000 to $1,500 by the Makkah pilgrims, the exchange of depreciating gold and old Rs500 denomination bills with the dollar and the weakening of UK pounds. According to another dealer, the exchange companies, in their Monday’s meeting with the SBP officials, had proposed that the central bank inject dollars into the market either under the “swap” mode or through national exchanges of the National Bank of Pakistan and Habib Bank Limited. He claimed that, “SBP had agreed, but still it has come up with no formula to inject the dollars”. The State Bank, the dealer said, had a tendency to pump the required dollars through “outright sale” but the money exchangers rejected the mode as problematic. The dealers complain that previously, like in the 2007 crisis, the currency dealers had been facing prolonged inquiries following the injection of dollars by SBP through the outright sale. “That’s why this time we want a simple swap of the greenback (with SBP) or make it through the national exchanges,” he told Pakistan Today. During 2007 crisis, the State Bank had, through outright sale, injected millions of dollars into the local money market to arrest the appreciating dollar then standing at Rs93. In its response the SBP chief spokesman Syed Wasimuddin said the central bank had made it clear to the money exchangers that it was there for help. “We don’t have an issue with this and have asked them to take dollars from us whenever they face a deficit,” the spokesman said.
