KARACHI: The US dollar lost Rs15.65 against the rupee after hitting an all-time high of Rs276.58 on Feb 3. Again, the gap between the open and interbank markets is widening alarmingly.

On Thursday, the dollar closed at Rs260.93 in the interbank after losing 97 paise. With the uncapping of artificial rates, the local currency plunged to Rs276 against the greenback from Rs230 in a couple of days, but it then started showing its real value with a slow recovery.

In the open market, the dollar traded at Rs270 with an increase of Re1 on Thursday, a gap of around Rs9 compared to the interbank rate.

Currency dealers said the expected inflow of $700 million from China this week would shore up the foreign exchange reserves of the State Bank of Pakistan (SBP) from the current level of $3.2 billion.

On the other hand, the market was confident that the government would succeed in reaching an agreement with the IMF that would unlock inflows from friendly countries and other multilateral lenders too.

The State Bank reported on Thursday that the country’s total foreign exchange reserves were $8.726bn during the week ended on Feb 17.

The central bank’s foreign exchange reserves rose by $66m to $3.258bn during the week, but it did not mention the origin of this increase. The holdings of the commercial banks were $5.468bn during the week.

The SBP has tight controls over the supply of dollars as it only allows the import of essential items like fuel and food.

Amid restrictions on letters of credit, the grey market resurfaced since the importers have been allowed to arrange dollars on their own. The dollar was trading at Rs280 to Rs282 in the grey [black] market.

The selling of dollars by exporters and the general public has improved liquidity in both interbank and open markets helping the rupee maintain its recovery drive.

Published in Dawn, February 24th, 2023