Dollar shot up to RS 138
09 October, 2018
The value of the dollar shot up Rs11.70 in the interbank market on Tuesday, hitting a historical high of Rs138 as the day's trading was underway. The dollar has been on an appreciating trend, reaching Rs124.30 in the interbank market on Oct 5, with rates in the open market reaching Rs127.80 on Saturday.
The interbank rate today rested at Rs124 as the market opened, rose to Rs138, then dipped slightly to Rs133.
For the past few days, the open market rate of the US dollar has been Rs4-5 higher than the interbank rate. The open market rate is Rs134 to Rs135, according to General Exchange Companies Association of Pakistan Secretary Zafar Paracha.
Currency dealers fear the alarming increase will fan panic in the market for dollars, causing a buying frenzy for the US dollar.
They speculate that the sudden increase in the price of the USD could be a result of rupee devaluation by the State Bank of Pakistan (SBP) in order to secure a bailout package from the International Monetary Fund (IMF). The Fund has demanded the government devalue the rupee by at least 15 per cent.
"The central bank has given an indication to let the rupee go with market forces," a broker was quoted as saying by Reuters.
Bankers and experts have said that the rupee value in the currency market was already reflective of its true position, suggesting that there was no need for the government to further devalue the local currency.
Paracha earlier warned that an immediate devaluation could result in market disequilibrium similar to earlier instances when banks were offering high price of dollars and open market trading was much below the official rates.
Forex Association Malik Bostan advised the government to be cautious. "It shouldn't devalue currency so much that it robs people of their purchasing power," he said.
"They [government] are going to the IMF now and they have devalued the currency on the Fund's demand. I think the govt has shot itself in the foot."
Pakistan’s economy has been wobbly for months amid speculation that Prime Minister Imran Khan's new government would request the country’s 13th IMF bailout since the late 1980s.
A formal announcement in this regard was made yesterday, with the government confirming that it would approach the IMF for balance-of-payments support and enter into a stabilisation programme.
Market analyst Muzammil Aslam said that once Pakistan would receive funds from the IMF, the economy would stabilise.
"I don't think it will go up to Rs150, the government won't allow the economy to spin out of control," he added.
Senior Pakistan Tehreek-i-Insaf (PTI) leader Ali Zaidi said that the jump in the exchange rate would "affect everyone, even us ministers".