An appreciating US dollar in the international money market after Osama’s death is seems to play a role in the so far stable currency market of Pakistan. Economic observers in Pakistan are cautiously seeing the possible upsetting impact of global appreciation of the greenback against major currencies on Pakistani money market. To this effect, analysts appear with two completely different opinions, as some see an imminent ‘role’ for the stronger dollar in determining the fate of local currency market, while others are dubbing the current strengthening of dollar as “a flurry” that came in immediate reaction to the internationally important incident.
“Global appreciation of the US dollar against major currencies seems to be a playing role in the local currency market,” viewed Khurram Schehzad, analyst at InvestCap Research. Substantiating his argument, the analyst said that Friday saw the rupee shedding by 42 paisa against the US dollar to 84.89 in the inter-bank market. The rupee depreciated by “27 paisa in the ready and 15 paisa in the Tom markets”, Khurram said, while giving a breakup of the rupee’s accumulative devaluation. Another point of view focuses more on the overall economic condition of the US, the sole superpower but the world’s ‘most indebted nation.’
“It (appreciation of dollar) is a flurry in an immediate reaction (to Osama’s death)” and not a permanent trend, said Asfar bin Shahid. The analyst said that, given the fact that America was the ‘most indebted nation’ in the world, the country’s currency could never maintain the current upsurge. A.B Shahid expressed concern that even the Pakistani rupee that, he said, was plugged with the greenback was likely to depreciate with the American currency. “The basic and permanent reason for the weakening of rupee is, however, the flight of capital from Pakistan,” the analyst said and added that “businessmen are not ready to invest due to the increased risk factor.”
Analysts and industry sources, however, are on the same page while analysing reasons of the appreciation in the value of US dollar, that they say was largely attributed to the falling prices of international commodities like crude oil and gold in the wake of the most-hunted fugitive’s killing at the hands of US Navy SEALs in the garrison town of Abbottabad last Monday. Assassination of Al-Qaeda chief is believed to have provided the dollar with an indirect stimulus to gain value against other currencies.
“Basic reason for a strong dollar in global money market is Osama’s death,” said Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan. The ECAP chief said that oil prices had dipped to $100 a barrel from the previous $130, while prices of gold were also falling down. A comparative outlook of the US dollar’s position, the money exchanger said that the greenback had strengthened during the week by almost two percent against major currencies, including the rupee. Monday, the day when Osama’s killing was unveiled, saw buying and selling of the US dollar against the rupee standing, respectively, at 84.40 and 84.50. After a week on Saturday, he said, the dollar’s value ranged between 84.60 and 84.70 in terms of buying and selling in the local money market.
“This shows a 20 to 30 paisa depreciation of the rupee,” the chief money exchanger said. The rupee had, however, added value against the euro and pound sterling during the week. According to ECAP chairman, on Saturday, the rupee stood against the two European currencies, respectively, at 122.20 and 122.50 and 138.90 and 139.20 against 125.20 and 125.70 and 140.60 and 141 a week earlier on Monday. This negative trend in the rupee-dollar parity, if persists, might cause some discomfort to the country’s economic managers who are yet to stop rejoicing over a stable rupee on the back of healthy $17.1 billion foreign exchange reserves held by the cash-strapped country.
