The dollar concluded at Rs297.13, marking an Rs1.35 increase from the previous week’s closing rate of Rs295.78. On the open market, the exchange rate for the dollar stood at Rs307.
Note: The fluctuation of these rates could be influenced by factors such as location, city-to-city distinctions, and the specific Exchange Company or bank facilitating the transaction.
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Pakistan’s Open Market Currency Exchange Rates
Provided here are the foreign and local currency exchange rates for US Dollar, UK Pound Sterling, European Euro, UAE Dirham, Saudi Riyal, and various other foreign currencies within Pakistan’s open market.
Import Trends for Dollar
As per insights shared by Khurram Shehzad, who serves as the Chief Executive Officer at the esteemed financial consultancy firm Alpha Beta Core, a discernible trend has emerged in the domain of imports. This trend portrays a deliberate and incremental increase in the scope of imports, indicative of a measured opening-up process.
Trade Finance Shift
Additionally, Schehzad highlighted that this development is accompanied by a noteworthy phenomenon in the realm of trade finance – the retirement of letters of credit (LCs). This aspect emphasizes a shift in the dynamics of financial transactions, potentially reflecting alterations in trading relationships and payment mechanisms.
Rising Oil Prices and Foreign Debt Repayment
“Oil is also going up in the international markets and besides, we need to repay foreign debt as well,” He quoted.
Komal Mansoor’s View
Expressing her perspective, Komal Mansoor, who holds the position of Head of Strategy at Tresmark, asserted that the devaluation of the rupee was a typical result associated with a caretaker administration.
Rising Deficit and Import Obligations Impact Rupee
“Furthermore, this phenomenon is particularly intensified at present due to the prevailing current account deficit and the settlement of accumulated import obligations,” she remarked, while also mentioning that the market was preparing for the local currency to surpass the Rs300 mark against the US dollar.
“From our perspective, there exists a tangible possibility of an impromptu increase in interest rates, which could potentially alleviate some of the strain on the rupee,” she communicated to the media.
Rupee Stress Forecast
Zafar Paracha, who serves as a currency dealer and holds the position of Secretary General at ECAP, noted that the week had started with the rupee experiencing stress, and he anticipated that a comparable scenario would endure in the foreseeable days.
He attributed the losses to entities involved in “speculation and manipulation.”
Country’s Fate in Mafia’s Hands
“We are moving away from reality and the country has been left at the mercy of these mafias,” Paracha told the media, adding that the Shehbaz Sharif-led government had left all matters to the caretaker set-up.
Rise of Shadow Market
In relation to the limitation imposed on the public’s trading of foreign exchange, he remarked that it appeared as though a “shadow market” had been intentionally established, supported, and encouraged.
“The earning in the grey market has skyrocketed to a point never seen before in the past 75 years,” Paracha quoted. “It seems like contradictory government policies are creating this situation.”
Urgent Need for Restructuring Amid Economic Uncertainty
He additionally mentioned that a combination of economic and political uncertainty prevailed within the nation. “The moment calls for a restructuring, a reduction in regulations, and the systematic organization of matters,” Paracha emphasized.
As reported by the Exchange Companies Association of Pakistan (ECAP), the decline in the value of the local currency can be attributed to a scarcity of dollars within the market. This shortage arose from an increase in demand driven by importers and a parallel trend of letters of credit (LCs) gradually being phased out.
Import Demand, LC Retirement Drive Currency Volatility
The heightened demand from importers contributed to the depletion of available dollar reserves, exerting downward pressure on the local currency. Concurrently, the gradual retirement of letters of credit further impacted the currency’s stability. As importers transitioned away from LCs, the dynamics of trade financing underwent a change, potentially influencing the overall demand and supply dynamics of the dollar.
These factors combined to create an environment of uncertainty and flux, leading to the observed slide in the currency’s value. By the market’s close, the dollar was trading above the threshold of Rs 307 on the open market, signifying the currency’s ongoing volatility and the multifaceted factors at play in the economic landscape.