Dollar may hit Rs90; $470m reserves wipe out

KARACHI - Once again the phobia of dollarization has emerged in the country, prompting speculations that dollar is set to reach Rs90 in the open market in coming days, The Nation learnt.
On Thursday, the dollar-rupee exchange rate was being traded close to Rs84 as importers and investors have started amassing the US currency with the motto to earn quick money from ongoing spree of depreciation in the value of rupee.
Sources in currency market said that the dollar has started edging up from the day the State Bank of Pakistan stopped providing the US dollars for the import of POL products. Prior to the Central Bank decision, the dollar-rupee exchange rate was stable well below Rs 82 at kerb, but now the dollar-rupee parity has moved forward to touch Rs84.
Over the last couple of days, the domestic banks have been offering up to Rs 83 to their customers who exchange dollars into Pakistani currency, a banker said.
He said the banks are selling dollar at Rs83.30 to Rs 85.50 to the buyers while in the open market the exchange rate of dollar is higher than this level.
In next few days the dollar-rupee parity could move in the narrow range of Rs90, a currency dealer predicted.
Bankers and the currency dealers said the central bank has stopped providing dollars for the import of oil as both the SBP and the government anticipate a shortfall in the disbursement of credit from the Friends of Democratic Pakistan, pledged at Tokyo moot while the International Monetary Fund is also delaying the release of next tranche worth $850 million.
After reaching $12.23 billion dollars mark on July 11, 2009, the country foreign exchange reserves have plunged to $11.76 billion on July 18, 2009, showing a decline of $390 million in just one week.
To avert rapid erosion in the reserves, the central bank has taken the decision not to extend dollar for oil import any more, a decision that triggered the fresh spree of the depreciation of rupee against the US dollar and other major currencies, said sources.
It is to be noted that the Pak rupee devaluation against the US dollar has started on July 28, 2009 and crossed the barrier of 83 as was being predicted by the money market dealers since last week on account of facing huge demand pressure of foreign exchange from importers and SBP decision of phasing out its provision to provide foreign exchange for imports of PoL products from August 01, 2009.
Sources said the local foreign exchange market has become more volatile in the backdrop of the SBP decision of shifting oil payments to the inter-bank market which will be resultant in weakening the value of rupee versus US dollar in the days to come.
According to sources, this move may not only decrease the foreign exchange stock of SBP but also trigger the central bank to averse it from taking the decision of reducing the interest rate in the upcoming monetary policy statement.
According to break-up of foreign reserve position as on 25th July, 2009, the total liquid foreign reserves held by the country stood at $ 11,766.8 million. Foreign reserves held by the State Bank of Pakistan amounted to $ 8,346.9 million while Net foreign reserves held by banks (other than SBP) reached $ 3,419.9 million.
Sources further claiming that after releasing a deferred amount of tranche from IMF to Pakistan, domestic exchange rate and the value of rupee would be stabilised as it happened earlier.