KARACHI: The dollar fell to Rs84 on Thursday reflecting the lower demand with falling imports and sufficient availability of the currency.
“The dollar was traded in the range of Rs83.95 to Rs83.98 in the inter-bank market on Thursday, which was the lowest of this calendar year 2010,” said Atif Ahmed, a currency dealer.
During 2008 and 2009 the dollar had been on rising against the local currency, which massively weakened the rupee. The loss of trust resulted into higher dollar savings, which also forced households to queue up for buying dollars to protect their savings.
During one and half years dollar appreciated by 24 per cent against the local currency and reached over Rs85 in February 2010.However, the reversal started from the last week of February and the dollar lost its increasing trend against the rupee.
On Feb 22, the dollar was traded as high as Rs85.02 to Rs85.04 in the inter-bank, which was the record price of the greenback in the local banking market.
“The dollar was traded at Rs84 from Dec 7 to 10 of the previous year and the barrier broke after three and a half months giving a sign of strength to the local currency,” said Atif. However, many currency dealers and analysts said the fall was not because of improved performance of local currency but was the outcome of much lower import bill compared to last year and higher availability of dollars.
During the 8 months of the current fiscal year (2009-10) the overall imports fell by $2.4 billion, while exports fell by just $390 million, which substantially reduced the dollar demand resulting into sufficient availability of the currency.
The dealers said the local currency did not improve its performance as the most killing factor for the local currency is inflation, which erodes the purchasing power of the local currency. During 2008-09, the average inflation was 20.5 per cent, which means the currency lost its purchasing power with the same level. The inflation is again in double digits as the February figure (year-on-year basis) was 13 per cent.
“Apart from the strength of local currency, the dollar might suffer from further fall in the aftermath of higher inflows as a result of Pakistan-US talks,” he said. The US reportedly assured $125 million for energy support programme, while the country expects to receive dues on account of joining war against terrorism.
The State Bank on Thursday reported that the country’s foreign exchange reserves reached $14.81 billion.
Mr Atif said the government had announced privatisation of some attractive units, which could attract foreign investment. However, so far the foreign direct investment (FDI) fell by 52 per cent during the first eight months compared to last year.
Analysts said the lower oil and other commodity prices in the global market also helped the country to save its dollar reserves.
The easy availability of dollar also impacted upon the rates in the open market. The open market on Thursday reported dollar trading at Rs84.30-40, thus eliminating the prospects of illegal transactions.
When the dollar reached over Rs85 in the inter-bank market, the open market offered Rs86 and above for the dollar, which paved way for illegal transactions of dollar in the open market.
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