Dollar fell by Rs. 4.50 in the open market to reach Rs. 123.50, the Currency Exchange Association said Saturday.
End of political uncertainty following polls and SBP’s notification to bind the dealers to transfer dollars through proper channels was attributed as the main factor in the significant drop in the greenback’s price, which had soared as high as Rs. 130 in the past week.
According to the association, the dollar price dipped due to a sufficient supply of the foreign currency in the local market. The individuals involved in dollar stocking were also involved in dollar selling.
With a small fall, investors panicked and are selling the dollar as much as they can, this eases supply and demand pressure and devalues dollar in local market.
At least four million dollars have been sold in open market from Friday till date which can further decline the rate of dollar, said the association.
The SBP notification, issued several days ago, binds dealers to transfer dollars only through proper banking channels with effect from Tuesday (July 24).
The State Bank of Pakistan has also stopped the exchange companies to move dollar in bulk. It also stated that LEA has the right to ask about the dollar that will be in move and will freeze it if the person cannot prove its legal status.
LEAs have also started the crackdown against the illegal exchanges companies that were near the border areas.
Currently the exchange companies are out of cash due to the massive selling of dollars and have stopped buying them.
Pakistan Forex Association President Malik Bostan said the drop should be seen in the backdrop of SBP’s move to halt the inter-city physical movement of dollars.
According to the media reports, China has agreed to immediately give a $2-billion loan to Pakistan, aimed at stabilising fast-depleting official foreign currency reserves and providing much-needed breathing space to the new government.
In a lifeline offered by the Chinese to stem a decline in foreign exchange reserves which will ease the pressure on the Pakistani currency that suffered due to a widening current account deficit that reached a peak of $17.99 billion during fiscal year 2018.
The country’s economic fundamentals had deteriorated ahead of the July 25 General Election.
Since December, the rupee had cumulatively shed over 21% of its value after the State Bank of Pakistan reportedly abstained from intervening in response to the pressure exerted by a widening current account deficit
From December 2017 till the middle of July this year, the rupee has been devalued in four rounds by the State Bank of Pakistan by around 21 percent to stimulate exports.
However, experts are of the view that despite the rise of the rupee, the economic realities of the country remain unchanged.