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Dollar sets new record against rupee - Lahore_Real_Estate - 09-25-2010 12:09 PM
KARACHI: Rupee once again lost weight against the US dollar in the inter-bank market and set new record on Friday, reflecting the higher demand of dollar, coupled with rising weakness of economy.
Currency dealers said the dollar was traded as high as Rs86.07-09 which was a record.
The dollar is gradually increasing since the beginning of this year, but total appreciation against the local currency is still below one per cent during this year.
The last record high was Rs86.03 but it started falling during Ramazan and traded as below as Rs85.60.
“Demand was high which kept appreciating the US dollar and reached record high in second session which means dollar could gain more during next session,” said Atif Ahmed, a currency dealer in the inter-bank market.
Currency dealers said the demand was high because of importer’s rush and some payments were made. However, no major bank was involved in collecting dollars for large payments as market used to witness previously.
Market experts see more depreciation of local currency in future as they see higher imports by the country. They said flood had badly damaged economy while major commodities, like wheat and cotton, could see serious shortages.
The exchange market sensed the impact of shortages of commodities and believed the county would have to increase imports to meet the shortages which would surge the import bill.
The imbalances on external account are clearly visible with the State Bank report, showing the current account deficit as 48 per cent higher during July-August of the on-going fiscal year.
This deficit increase is against the same period of last year.
“The 48 per cent current account deficit tells the story of future trend of dollar demand in the Pakistani market,” said Atif adding that the deficit figure forces importers to buy more dollars.
The currency dealers see more appreciation of dollars which may end at Rs87 by the end of December.
A currency expert said the country requires higher inflow of dollars but the situation is reverse. The IMF has already delivered major part of $11.3 billion under Standby Agreement while it held the last two tranche demanding more fiscal discipline for its release.
The country has been supported by the overseas Pakistanis who sent record amount of $8.9 billion last year and remitted record amount during July-August of the current year.
The country received $933 million in August and $1.724 billion during July-August which was 13 per cent higher than last year.
“Only higher exports could inject strength in the local currency,” said another currency dealer. The greater the trade and current account imbalances, the greater would be the depreciation of local currency.
He said if the inflows fall, the foreign currency reserves would start melting and it would be another blow to the local currency struggling to stay firm with the US currency since the beginning of 2010. In 2009, the rupee fell by 6.1 per cent.