The US dollar is now selling for Rs155 in the open market but experts say it would be staying in this range. It has increased by Rs1.40 over the last week.
BMA Capital’s Head of Research Faizan Ahmed says that current account balance figures are favorable and so are foreign exchange reserves.
“I don’t see any reason for dollar rate to increase significantly,” he said.
Increased imports of food items such as wheat and machinery have put the rupee under pressure, according to Ahmed.
He, however, said the rupee does depreciate against a basket of currencies annually and he sees the dollar rate going up to Rs158 by the end of 2021.
“On a short-term basis, I see dollar in the range of Rs150 and Rs155,” Ahmed said.
Malik Bostan, the Forex Association of Pakistan chairperson, said that importers have been opening LCs (Letters of Credit) in haste, fearing a lockdown in the country. This has been putting rupee under pressure against dollar, he said.
Bostan explained that importers have started opening LCs to import now, even if they were supposed to open them two months later. An LC is the assurance by an importer’s bank to the bank of the seller abroad that a certain amount has been locked in their name. When the consignment arrives, the payment is released. It is basically a payment in transit.
“It may become difficult to open LC and import if there’s a lockdown,” Bostan said. “And then if the lockdown begins internationally, the shipping lines will again choke and everything will come to a halt.”
He noted that the government has allowed the private sector to import Covid-19 vaccines too.
“Vaccine imports alone could cost approximately $1 billion this year,” Bostan said. “It may put pressure on foreign exchange and subsequently increase the dollar rate.”
But Zafar Paracha, the Exchange Companies of Pakistan secretary, said the recent hike in dollar’s value was only due to a correction.
“The rate fell sharply so it took a bit of a correction,” he said.
