In a U-turn, rupee dives in open market
Pakistan’s currency on Monday made another spectacular reversal, dropping 2.59%, or 8, to a four-day low of $308 against the US dollar on the open market amid a shortage of ‘2, greenback’ at shop counters. On the interbank market, the currency fell to a two-week low of 286.19 against the greenback, down 0.18%, or 0.51.
On the open market, the currency had risen 9.47%, or 27, to 285/$ on June 1 but closed at 299/$, although many traders reported a shortage of dollars. The currency recovered after central banks allowed commercial banks to buy dollars from the interbank market, not the open market, to settle international payments made by their customers via credit cards.
Speaking to The Express Tribune, Pakistan Association of Exchange Companies (ECAP) secretary general Zafar Panache said the US dollar for currency traders has been depreciating. “Either the people holding the dollar think the gains are temporary and the local currency will fall again or they sell them on the illegal Hundi-Hawala market where exchange rates hover around 320/$.” He said contradictory government policies fueled interest in the illicit currency market.
“Most of the imports of (so-called) fixed term payments are made via the Hundi-Hawala system, otherwise who will supply the goods on such long term payments,” he asked. He referred to the government’s recent request for traders to import raw materials on a one-year subsidy basis.
Piranha pointed out that the exchange companies were blamed for operating the market illegally but the banks were found to be involved in exchange rate manipulation. The ECAP secretary said government policies had shifted most of the rupee-dollar exchange business from the open market to the central banking market. In its latest version, it allows banks to buy dollars from the interbank market to finance credit card payments.
