The federal government’s efforts to bring the dollar back down to Rs250 have reportedly failed, as the greenback continues to trade above Rs280. According to reports, during recent meetings held in the federal capital, authorities made efforts to push the exchange rate down to Rs250 per dollar.
Stakeholders present at the aforementioned meetings included currency dealers, commercial banks, and jewellers. However, it merits a mention that the participants of the meeting reportedly deemed the target unrealistic and dismissed it.
Stakeholders present at the meetings included currency dealers, commercial banks, and jewellers who reportedly deemed the target unrealistic and dismissed it.
While the federal government has not met its target exchange rate of Rs250 per dollar, the rupee has posted marginal gains in previous trading sessions. This appreciation can be attributed to the crackdown against the smuggling of dollars out of the country.
Data from reports suggests that since July 23, the rupee has appreciated by a respectable Rs3 against the greenback. As per the details, this appreciation has been recorded by both open and interbank markets.
According to reports, the gain did not bring the market rate in line with official expectations, as one US dollar continued to trade at Rs282.87 in the interbank market despite the rupee’s appreciation.
The rate is reportedly even more unfavourable to the official target in the open market, with one US dollar being quoted at a rate of Rs285.15. Moreover, currency dealers have reported shortages of foreign currencies such as the pound, euro and dollar.
A fall in the availability or supply of a particular currency can result in an increase in its value against others. In this case, it is against the rupee. Reports suggest that a black market for currency exchange has resurfaced, offering rates higher than those set by the Exchange Companies Association of Pakistan (ECAP).
As per reports, this problem extends into the interbank market as banks permitted by the State Bank of Pakistan (SBP) to sell dollars to importers are setting higher exchange rates. Moreover, these banks are also favouring their own clients over others, which explains the difficulty certain importers have faced in obtaining a letter of credit (LC) for amounts as small as $500,000.
Despite its best efforts, the federal government will not be able to reduce the exchange rate back down to Rs250 per dollar. Reports indicate that the rupee may appreciate “into the Rs270s” against the dollar; however, this gain is expected to be temporary, as it is not considered sustainable.
