Dollar slides to its lowest level in almost two years
The dollar was selling at Rs154.10 at the inter-bank, which is nearly a two-year low. The last time dollar was selling below this level was on June 14, 2019.
“The market sentiments are that that the dollar will further shred its value more,” said Zafar Paracha, Secretary Exchange Companies Association of Pakistan (ECAP).
The dollar rate fell by Rs4 or 2.4% during March from Rs158.10.
“When the market behaves this way, the selling begins which further puts the dollar under pressure. The same thing happens when the market expects the dollar to rise, people start buying, and subsequently dollar rate increases.”
He added that these market sentiments are due to improved inward remittances and lower outward remittances.
“Dollar may further lose its value and it can go down to as low as Rs152,” he said.
Paracha said the Naya Pakistan Certificate offers a lucrative 7% interest rate, which was increasing the flow of dollars into the country.
Head of Research at BMA Capital Faizan Ahmed also said that he sees the dollar fluctuating between Rs152 and Rs155.
“The market was expecting that current account deficit would be high in February, something around $500 million but it actually came out at only $50 million. It also played a role in the falling rates of dollar recently,” Ahmed said.
During the first eight months of the fiscal year 2021, the current account showed a surplus of $881 million as compared to a deficit of $2.74 billion in the same period last year.
Ahmed added that inward remittances have also fared better, contrary to market expectations.
The remittances stood at $18.7 billion in the first eight months of FY2021 (July to February), which was 24% higher than the remittances during the same period last year.
Meanwhile, Ahmed said that Pakistan is going to issue Euro bonds to the tune of $3 billion in the international market, which along with inflows from the World Bank and IMF, will further shore up dollar reserves.
The State Bank of Pakistan announced that remittances sent through Roshan Digital Accounts had crossed $650 million in eight months.
“I believe Roshan Digital Accounts has immense potential. The response so far is low because people are learning—both the overseas depositors and bank staff involved. The State Bank needs to conduct more awareness programmes to tap its actual potential,” said Paracha. “According to my assessment, remittances and investment through Roshan Digital Accounts can increase to $1 billion every month within a couple of years.
Meanwhile, Ahmed said that Pakistan may issue Euro bonds soon in the international market, which may also improve foreign exchange reserves and subsequently strengthen the rupee.
