The US Dollar rate in the open market could get out of control if the greenback’s supply issues aren’t urgently addressed.
President of the Forex Association of Pakistan Malik Bostan said on Wednesday that Exchange Companies (ECs) will be unable to control the dollar rate in the open market unless the dollar supply improves.
According to MG Link News, Bostan has sought permission to use the dollars held in their accounts in a meeting with the State Bank of Pakistan (SBP). Furthermore, the ECs have requested the provision of dollars against home remittances served by ECs’ accounts.
According to Bostan, if the dollar supply does not improve, the open market dollar rate will likely rise. Commenting on the open market dollar fluctuation in the early hours of trade today, he said, “The drastic appreciation and depreciation within an hour was only due to speculative elements as we have only removed the cap from dollar rates,” adding that rates will be determined solely by market demand and supply.
If the existing exchange rate framework shifts to a model based on demand and supply in the market, then many individuals and businesses in Pakistan may face significant financial difficulties as a large portion of the country’s economy is contingent on dollar-denominated transactions.
The Pakistani rupee has maintained its downward slump against the US Dollar with open market rates as high as 252.5 after exchange companies on Tuesday decided the removal of the open market price cap on the US Dollar.
Despite the ‘cap axe’, exchanges are buying dollars at 243 and are not selling at all. The exchange companies have brought the rate downwards to 243 after it opened at 252. They were buying the greenback at 252, and while unconfirmed, it has been suggested that the cap removal and today’s thin open market movement are most likely traders’ retaliation toward the central bank’s suspension of 11 outlets of different exchange companies.
At today’s close, the PKR extended its losing streak to 26 days and closed at Rs. 230.89 after quoting an intraday low of 233 against the dollar.