KARACHI: The open market was marred with confusion as frustrated buyers and sellers of currency remained clueless on the future course of rupee-dollar parity.
Rife with rumours and reports of a massive inflow of dollars, dealers traded the two currencies with a spread as high as Rs13 in the open market on Saturday, uncertain on what the inter-bank exchange rate would be on Monday.
The dollar was being bought for as low as Rs113. In contrast, currency dealers were only willing to sell the US currency for around Rs124-126.
On Friday, The Express Tribune reported that China has agreed to lend $2 billion as an “official bilateral inflow”, a development that would ease pressure on Pakistan’s foreign currency reserves and the rupee that has shed around 22% since December 2017.
The rupee has recovered 0.5% in the ongoing week, closing at Rs127.86 in the inter-bank market on Friday.
However, on Saturday, and no inter-bank rate to go on, currency dealers were trading on speculation that the inter-bank rate would see some movement in favour of the rupee.
The panic widened the spread between the buying and selling rates, and marks one of the rare occasions when the open-market rates were lower than the inter-bank’s.
A brief survey suggested currency dealers were buying dollars in the range of Rs113-122 and selling in the Rs115-126 bracket. A leading currency exchange also reported to have suspended trading three to four hours before the official closing time.
On Friday, the dollar closed at Rs126 and Rs127, respectively, in the open market.
“We are selling the dollar at Rs126…and buying it at Rs115,” a Karachi-based currency dealer said, adding he has a high supply of dollars bought at a comparatively higher rate.
He said the low buying rate was based on expectation that the dollar would lose some of its strength on Monday.
“One can expect the rupee appreciate against the dollar in the inter-bank market on Monday,” State Bank of Pakistan (SBP) spokesman Abid Qamar told The Express Tribune on Saturday.
“However, the actual exchange rate (rupee-dollar parity) would be known on Monday.”
National Bank of Pakistan (NBP) President and CEO Saeed Ahmad said he expects the dollar to weaken in inter-bank. “The rupee may settle at around Rs125 (to the US dollar) after China pledged to immediately provide $2 billion (to Pakistan).”
“Friendly countries are expected to give around $4 billion,” he said, adding the increase in supply should strengthen the rupee.
The country’s foreign currency reserves have dropped to an alarming level, amounting to $9 billion in the previous week.
The inter-bank market gives direction to open market dealers regarding currency prices. However, in rare cases, currency dealers tend to lead the way, especially when there is speculation involved.
“I cannot give you a concrete quotable price at which the dollar traded during the day as currency dealers sold and purchased dollars at a variety of rates,” said Pakistan Forex Association President Malik Bostan.
But on record, he said the association quoted closing buying and selling prices at Rs124 and Rs126, respectively.
“There were hardly 1% buyers…and 99% sellers in (the open) market (on Saturday),” he said.
A currency dealer at the Dollareast Exchange Company said they ended trading after the first half.
“There is no supply and no demand for dollars. We ended the trades in the first half, offering a buying price of Rs121.
“We have (major) foreign currencies in adequate amounts to sell, but we have run out of cash (in rupee terms) as there were absolutely no buyers. All walk-in customers were sellers.”
He hoped the situation would go back to normal on Monday as the resumption in inter-bank market would give a clear direction to currency dealers.
The SBP spokesman said that the central bank has issued clear directives to currency dealers to completely halt the physical movement of dollars among cities and only move them through proper banking channels. This, he said, could be a reason behind the dollar plunge.
The directives came into effect on Tuesday (July 24).
Many dealers move dollars in physical form via air and/or roads traveling from head offices to branch offices nationwide.
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The rupee weakened against the dollar to Rs128.30/128.50 in the inter-bank market on Thursday