KARACHI: The first active day of 2020-21 saw the rupee make some gain against the dollar which remained dominant throughout the outgoing fiscal year that ended on June 30.

The rupee rose by Rs1.17, or 0.7 per cent, on Thursday to close at Rs166.88. Currency dealers said it was shocking for them that the dollar depreciated by Rs1.17 in a single session.

“In fact the dollar should have depreciated on June 30 when companies calculate their profits at the end of the fiscal year; low greenback price increases the bottom line of firms who have millions in other foreign currencies,” said a senior banker dealing in the interbank market.

The dollar traded at Rs166.88 at the close of the day in interbank market, said a senior banker who believes the greenback could gain once again as trading resumes on Monday (New York is closed on Friday on account of Independence Day).

On June 30 — the last day FY20, the dollar ended at Rs168.05, sliding by 13 paisas from its opening rate.

“We were expecting the dollar to go high. It slightly lost against the local currency just before the end of the year, but the State Bank influenced through its typical mechanism to bring down the exchange rate in favour of rupee,” said the banker.

The dollar was in high demand during June as importers rushed to buy petroleum products which were short in the country.

Bankers said the exchange rate is stable and would keep fluctuating within the range of Rs165-170 while there is no chance to see any major gain by the rupee mainly on account of low foreign exchange reserves.

“The inflows to the State Bank have recently increased but other factors like low remittances and sharply declined exports would not allow the rupee to show strength in FY21,” said the banker.

President of Forex Association of Pakistan Malik Bostan said the open market was slow while the public demand was at the lowest level. All foreign tours from the country have stopped and no fresh students going abroad for education were the major reasons.

A major chunk of dollar demand came from those performing Umrah. Due to Covid-19, even Hajj buying has been stopped as Saudi Arabia has barred international pilgrims this year. “Since buyers are not available, we deposit almost all the dollars into banks,” said Bostan.

Reserves rise

Meanwhile, reserves held by the SBP jumped by net $1.27 billion to $11.231bn during the week ended on Jun 26. The increase came after inflows worth $2.046bn were received from the international financial institutions, including $737 million from the World Bank, $503m from Asian Development Bank, $500m from Asian Infrastr­ucture Investment Bank and $300m as Government of Pakistan loan disbursement from China. On the other hand, $809m were recorded in external debt payments.

This took the country’s overall reserves to $17.971bn while holdings of the commercial banks stood at $6.47bn during the period under review.

Published in Dawn, July 3rd, 2020