- Development comes after SBP allows card-based transactions to be settled through inter-bank market
The Pakistani rupee witnessed a significant appreciation against the US dollar in the open-market on Thursday.
The US dollar was being quoted in the range of 295-300 in the open-market, as compared to 311-314 a day ago. However, multiple currency dealers Business Recorder reached out to said the USD remains in short supply, saying customers are not approaching the market to sell their currency. They said the market would “soon find its equilibrium”.
Separately, the dealers conveyed that the Saudi Riyal remained unavailable ahead of Hajj requirements.
The open-market changes come “after the State Bank of Pakistan (SBP) allowed credit/debit card payments (to be settled) through banks,” said Mohammed Sohail, CEO Topline Securities, in a note.
The SBP on Wednesday allowed authorised dealers of foreign exchange to purchase US dollars from the inter-bank market for settlement of card-based cross-border transactions with International Payment Schemes (IPS).
Previously, as per the SBP directives, authorised dealers were allowed to purchase USD from any exchange company from settlement of card-based cross-border transactions with IPSs such as Visa, MasterCard, etc.
However, now the SBP has decided to allow the greenback purchase from inter-bank for such payments to facilitate customers who were seeing a wider gap between the two currency markets.
“In view of the representations received from stakeholders, it has been decided to allow authorized dealers (banks) to purchase USD from interbank for settlement of card-bases cross border transactions with IPSs,” a circular issued by the SBP said.
This facility is initially being provided for two months.
Experts attributed the decline in USD rate in the open-market to a reduction in the buying pressure.
“Previously, the rates in the open-market being charged for card-based transactions was significantly higher than in the inter-bank,” said Saad Khan, Head of Research at IGI Securities, told Business Recorder.
“The customers were paying higher rates. Moreover, foreign exchange income of banks and the government FED tax collection also suffered. However, due to the latest measure, the card-based transactions have been brought under a legal channel,” he added.
The expert said that it would take some time for the open-market rate to achieve its equilibrium.
Earlier, Zafar Paracha, Secretary General, Exchange Companies Association of Pakistan (ECAP) appreciated the State Bank move saying now the demand for USD will be increased in the interbank and decrease in the open market as banks will buy dollars from the interbank market for IPSs settlement.