Rupee continues to lose face against US dollar as importers rush to six-month “forward booking” of the greenback on rumors that central bank was purposely letting local currency depreciate in line with regional trends. Thursday saw greenback appreciating by 5-paisa to 88.80 against the rupee compared to Wednesday’s Rs88.75 in the inter-bank market.
Currency dealers in the open market, however, sat back and comfortably traded dollar at Rs88.60 (selling) and Rs88.50 (buying). “The exchange rate’s difference between the open and inter-bank market ranges to 20 paisa,” a dealer told Profit. Importers’ panic buying, as a currency dealer dubbed it, led to increased demand for dollar on the local inter-bank market where, market sources said, demand for American currency was at least $50 million.
On the other hand, exporters are adding fuel to the fire by holding back their export proceeds ranging from $150 million to $200 million, to get maximum benefit of the reported, but not officially announced, depreciation of rupee. What is the solution for ingraining panic in inter-bank market then? Market sources said the ball is in the court of State Bank of Pakistan (SBP) which should immediately come up with a policy statement on the fate of rupee to bring present uncertainty to its logical end.
According currency dealers, the importers, deeply panicked by media reports that central bank was following a regional trend on currency depreciation and was, as a matter of policy, not coming to the rescue of rupee which had devalued by over 2-rupee against dollar during last month. “The panicked importers are doing forward booking of dollar and the banks, remaining on the safer side, are giving them an exchange rate as high as Rs92 for the six-month bookings,” said Malik Bostan, president Forex Association of Pakistan (FAP).
On the other hand, FAP chief said, exporters had held their export proceeds to the tune of $150 to $200 million to capitalise on the “rumours” of rupee depreciation. “Daily demand for dollar of the inter-bank market ranges between $250 million and $300 million but the ongoing panic buying had created a gap of about $50 million in the supply and demand,” Bostan said. The money exchanger said foreign exchange companies were surrendering almost 80 per cent of their daily surplus supplies, ranging between $5 and $6 million, on the inter-bank market as demand in open market was standing low at 20 per cent.
Factors like recent hike in international oil prices, crossing the $100 a barrel against $70 per barrel previously, and increased import of mobile phones had inflated the cost of imports to Pakistan. The dollar-hungry Pakistan’s import bill, State Bank figures for July-Oct FY12 show, amounted to over $13.4 billion, up 23 per cent compared to $10.879 billion of the same period in FY11. This widened the country’s deficit-prone trade balance to $5.2 billion against $3.7 billion of last year.
“State Bank should officially clarify its stance on rupee depreciation. Only if depreciation rumors are clarified the current panic buying would end,” the FAP chief suggested. However, when contacted SBP chief spokesman Syed Wasimuddin said central bank would make “no comment” on the issue. Bostan went on to say that importers, fearing further depreciation of rupee, were resorting to forward booking of the greenback. “This has increased demand on the inter-bank,” he added. Further, analysts said, rupee would face additional pressure with the country’s depleting foreign exchange reserves which, State Bank said, had contracted to $16.884 billion up to 25th November, down by 0.45 per cent compared to the preceding week’s $16.961 billion.
“Forget about foreign financing, only the recovery of embezzled money lying in offshore accounts can rid the country of its financial woes,” said economist Asfar Bin Shahid.
