Dollar surges to Rs184.44 on strong demand

KARACHI: The US dollar on Tuesday gained another Rs1.90 against the local currency in the interbank market on strong demand for greenbacks amid tight supplies.

Currency dealers were not sure for any immediate support to help out the local currency from frequent depreciation against the US dollar but waiting for good outcome from fresh talks with the IMF and foreign tour of Prime Minister Shehbaz Sharif.

The dollar was traded with restricted approach by banks but could not stop it from appreciating against the rupee. The closing price was Rs184.44 against Rs182.54 a day earlier, according to the State Bank of Pakistan (SBP).

The dollar showed its strength and forced the rupee to depreciate by 99 paise on Monday after losing about 3.65 per cent during the last seven sessions. The change of government in Islamabad had helped the rupee to stage a massive recovery to Rs181.55 from an all-time low of Rs188.18 hit on April 7.

“Fear is there that dollar will gain more as uncertainty still persists that may further weaken the rupee,” said Atif Ahmed, a currency dealer in the interbank market.

Currency dealers were hopeful that China would soon rollover about $2.4bn loans while the IMF could ease its pressure on the country. The new finance minister is reportedly engaged with the IMF to start negotiations.

“The prime minister is expected to visit Saudi Arabia and China — both countries have been helping Pakistan improve its external accounts and foreign exchange reserves,” said Atif, adding that he is not expecting any big change in the exchange rate.

Ccurrency experts and dealers said the exchange rate could only improve with higher exports and increasing SBP reserves. The country’s exports have increased by 25pc so far, but the central bank has lost $9.224bn of foreign exchange reserves since August 2021.

“If the current account deficit widens to $15bn by the end of this fiscal FY22, the exchange rate has no chance to favour the rupee and the dollar will soon reach Rs190,” said a senior banker.

The continued appreciation of US dollar has inflated the local economy as imports have vast impact for all most all segments of the economy. The State Bank has recently increased the interest rate by 250 basis points to control the rising inflation.