$-Dealers
ISLAMABAD: The Pakistani rupee (PKR) has exhibited remarkable strength against the US dollar in the open market after crackdown against $-dealers. It led to further gain of 4-rupee in the value of PKR on Friday.
Over the past four days, the local currency has surged by 30 rupees (9.97%), moving from PKR 333 to PKR 301 against the USD.
Simultaneously, in the interbank market, there has been a 2-rupee appreciation in today’s trading session. The dollar-rupee exchange rate stood at 302.74/302.84 on Friday morning. This follows a 2-rupee increase in PKR value from the previous interbank session.
PKR gains Rs 32 in the past four days after a crackdown against $-dealers.
What’s particularly noteworthy is the shrinking gap between the interbank and open market rates, now standing at just 0.57%.
This resurgence in the local currency can be attributed to recent reforms initiated by the State Bank of Pakistan (SBP) in the exchange companies sector.
These reforms are designed to streamline and unify various exchange companies into a single category with clearly defined objectives and increased capital requirements.
Additionally, the reforms incentivize major banks to establish wholly-owned exchange companies to better serve the legitimate foreign exchange needs of the public.
Furthermore, the ongoing crackdown on speculators, hoarders, and smugglers has boosted market sentiment significantly. Consequently, the disparity between open market and interbank rates has fallen well below the IMF’s suggested threshold of 1.25%.
Notably, even the black market for Hawala/Hundi is witnessing a substantial reduction in dollar rates. This is a significant departure from the past trend where the increasing demand for dollars. It was an outcome of speculation and smuggling, consistently widened the gap between open market and interbank rates.
On September 4, 2023, the gap had reached a high of Rs 25.36 per USD or 8.3%, far exceeding the IMF’s recommended limit.
It is evident that the government’s proactive measures are yielding positive results. The strategy curbed speculative activities in the open market, without the need for interventions in the interbank sector.
Further progress could be achieved if the government extends similar initiatives to combat gold smuggling.
