Dollar dips Rs19 against PKR in open market after SBP relaxes rules for banks
Business
The greenback had reached Rs316 level
KARACHI (Dunya News) – The US dollar witnessed a record single-day decline during early trading on Thursday as the rupee gained Rs19 after weeks and months of sustained losses.
By the time this report was filed around 11:39am, the dollar was being traded for Rs298 down from the previous day’s level of Rs316. The greenback also lost Rs0.17 against the local unit in interbank market to be traded at Rs285.30.
On Wednesday, the US dollar had closed at Rs285.47 in interbank trading against the previous day’s level of Rs285.35, as the rupee was down 12 paisa or 0.04 per cent.
Interbank closing #ExchangeRate for todayhttps://t.co/K9BfoSuuw2 pic.twitter.com/omjDn6uqDO
— SBP (@StateBank_Pak) May 31, 2023
The much-awaited development comes after the central bank on Wednesday allowed authorised dealer [banks] to purchase US dollars from interbank for settlement of card-based cross-border truncations with International Payment Schemes (IPSs).
Earlier, the authorised dealers were only allowed to purchase the US dollar from any exchange company for card-based cross-border truncations with IPS including Visa and MasterCard.
In his reaction to the latest gain made by the local currency, Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan congratulated Finance Minister Ishaq Dar for taking a timely decision. He revealed that Dar had contacted him after the dollar reached the Rs316 level.
The move was expected to help reduce the pressure on the exchange companies and the local currency is likely to appreciate against the greenback and immediately produced the desired result.
In this connection, the State Bank of Pakistan (SBP) in a notification said the decision was made “in view of representations received from stakeholders”, which was applicable with immediate effect and would remain in place till July 31, 2023.
Experts and currency dealers welcomed the move, citing a huge demand of greenback in the open currency market. It is not just travelers, students and pilgrims who were purchasing US dollar from the exchange companies but also the banks had to do the same for the card-based cross-border transactions with IPSs.
Commenting on the move, Zafar Paracha of Exchange Companies Association of Pakistan (ECAP) said the demand for the US dollar would increase in the interbank and decrease in the open market. It was going to reduce the open market exchange rate by up to Rs25.
The rupee had reached the Rs313-316 range in recent days at a time when the interbank rate stands at Rs285.47, translating into a difference of over Rs27.
It means the huge difference between the official and open market encourages transactions outside the formal banking system – blacking marketing and use of illegal means like hawala and hundi, especially by the expats sending money back home.
