Open-market: rupee has quietly strengthened to 293-295 against US dollar

The Pakistani rupee has gradually appreciated to narrow the exchange-rate gap with the inter-bank market, as it continued its merry ride against the US dollar on Thursday as well.

The US dollar was being quoted in the range of 293-295 in the open-market, as compared to a range of 294-296 on Wednesday. The rates are a far cry from the range of 308-310 dealers were quoting earlier this month.

The PKR also inched up against the USD in the inter-bank market and appreciated 0.06% against the greenback during the trading session.

Meanwhile, multiple currency dealers Business Recorder reached out to said there is an ample supply of USD in the market, but customers would need to provide documentation of travel to ensure “the dollar needs were genuine”.

Experts said the improvement comes as supply-demand situation improves amid measures announced by the government.

“State Bank of Pakistan’s (SBP) earlier measure of allowing banks to purchase US dollars from the inter-bank has reduced the rate gap between the inter-bank and open-market,” Zafar Paracha, General Secretary of Exchange Companies Association of Pakistan, told Business Recorder.

“Although our business has suffered due to the said measure (lowered by 80%), it is a good move in order to diminish the dollar gap,” said the currency dealer.

Earlier, the central bank allowed banks to acquire US dollars from the inter-bank market for the settlement of card-based cross-border transactions with the International Payment System.

Demand from Hajj travelers has also subsided, and overseas Pakistanis coming back to the country are also bringing foreign currency, said Paracha.

“Moreover, banks are giving cash dollars to their public depositors, and this has improved inflows.”

Paracha was of the view that the rate is expected to improve further in the coming days.

“A large appreciation is expected in the inter-bank, which would be reflected in the open market,” he said.

Meanwhile, Samiullah Tariq, Head of Research at Pakistan Kuwait Investment Company Limited, also said that the government intends to decrease the gap between the two markets, in order to improve the flow of remittances.

“The government strategy is to reduce the gap in the exchange rate in the inter-bank and open market,” Tariq, told Business Recorder. “This is the right move, as it would improve the flow of remittances through formal channels.”

The inflow of remittances has fallen in recent months, and in May it clocked in at $2.1 billion.

“It is reported that the government brought in liquidity to ease the position of exchange companies,” said Tariq.

The analyst said that an amount of $5-10 million is enough to impact the currency market, as there is already a very limited demand for US dollars in the open-market. “Mostly, dollars are being purchased for travel purposes,” he said.