Open-market: USD hits 325 against rupee

The US dollar climbed to new highs against the rupee in the open-market, and reached the 325 level during trading.

On Wednesday, dealers Business Recorder reached out to said the rupee was being quoted at 325 for selling and 322 for buying purposes for customers in the open-market, up from Tuesday’s levels of 323 and 320.

“The rise in USD rate in the open-market is attributed to ongoing depreciation in the inter-bank,” a currency dealer told Business Recorder.

In the inter-bank, the rupee weakened further against the greenback.

Talking to Business Recorder, Mustafa Pasha, Chief Investment Officer at Lakson Investments Limited, said the open-market is prone to sharp volatility and movement, as these markets are very thin.

“Inter-bank is the main market, but it remains entwined with the conditions of the International Monetary Fund (IMF), i.e. maintaining a 1.25% gap between inter-bank and open-market rates, while easing of import controls, which has lead to demand for dollar.

“Thus the inter-bank is under pressure, which is reflected in the open market,” he said.

The gap between rates in the inter-bank and open markets is required to be less than 1.25% under one of the structural benchmarks set by the IMF.

However, the gap – called the premium by the IMF in its country report on Pakistan published after the Stand-By Arrangement’s approval by the Executive Board – has been widening over the past few weeks.

“The government needs to control the open-market,” said Pasha, adding that “the best option here is that it should arrange US dollar inflows from its bilateral and multilateral partners.”

Meanwhile, another economic expert termed the increase in USD rate in the open-market as a positive sign. “It will ensure that the remittance inflows through formal channels would remain steady, which is vital for the cash-starved economy,” said the expert.