The US dollar crossed the 106 mark against the rupee in the open market on Tuesday after a gap of two months, market sources said.
“The dollar traded as high as Rs106.20 during the day,” said Zafar Paracha, secretary general of the Exchange Companies Association of Pakistan. Earlier, the greenback surpassed Rs106 on May 23.
Despite higher inflows during Ramazan, the local currency remained under pressure against the dollar.
A British vote to leave the European Union added insult to injury, jolting the pound in the international market. Though the pound depreciated against the rupee, it strengthened the dollar in both international and local markets.
Currency dealers believe the exchange rate could see more deprecation of rupee once the inter-bank market respond to changes. Dealers in the inter-bank market said the exchange rate in the banking market was not real and was being managed with the influence of the State Bank of Pakistan (SBP).
The State Bank does not have to apply influence through any written instructions as it has many other tools to manage the exchange rate at the required level. The exchange rate is almost steady in the inter-bank market for more than five months now. On Tuesday, the dollar traded in the range of Rs104.80-90.
Currency experts were sure before Ramazan that the dollar would fall significantly during the month due to significantly higher expected inflows. However according to some top-level currency dealers, inflows remained unexpectedly lower which did not allow the local currency to gain against the greenback.
The rupee has traditionally been on weak ground against the dollar. But the present situation is mostly in rupee’s favour as Pakistan has record foreign exchange reserves of over $23 billion while it received $20bn as workers’ remittances in the fiscal year 2015-16.
Currency dealers said heavy investment in the property market is now facing a difficult situation after the imposition of tax. The investors are now struggling to withdraw investment minimizing losses.
“I believe that investment in property will now flow towards dollar which has now emerged as the single strongest currency in the global market after Britain’s decision to quit the European Union,” said Anwar Jamal, a currency dealer in the inter-bank market.
There is no official data available to show how much money had been invested in the property market during the last two years. But yields in this sector have been so high that property dealers operating in Dubai shifted their offices to Pakistan, particularly to Karachi.
While heavy investment artificially boosted property prices in the major cities of Pakistan, such as Karachi, Islamabad and Lahore, the sector also saw investment in dollars.
Currency dealers believe the dollar will continue to rise in both inter-bank and open markets in the coming days.
