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Firmness persists in currency markets

SEEMA SHAFI

KARACHI: Steadier trend persisted in the local currency markets following the positive developments on the economic front last week.

The rupee maintained its overnight level of Rs 51.90 for both buying and selling in the inter-bank transactions, while it shed two paisa in kerb at Rs 53.95 and Rs 54.00.

Some experts were of the view that several investors preferred the sidelines due to stable trend in the local currency markets. They also predicted that the rupee would retain its firmness in relation to the dollar due to the pre-cautionary measures taken by the government.

Commenting on the fresh move by the State Bank of Pakistan (SBP), Ovais Kalia of KKI said that the rupee would not show major fluctuation in its parity in the near future. Some currency analysts shared the same idea and said that it was a very positive development and added that it would impact positively on the currency markets.

In order to further liberalise the foreign exchange regime in the country, the central bank last Tuesday restored the powers of the authorised dealers (banks) to remit foreign exchange in various forms without its approval.

Appreciating the SBP's move, currency monitors were of the view that the country still needed revolutionary changes in its currency policy to bring back the economy on track.

A latest study published by the World Bank has suggested a virtuous growth-saving model through fiscal consolidation, and strong sturctural reforms, to overcome macro-economic difficulties.

Declining trend in saving rate has become a major and continuing source of the macro-economic weakness. Not only saving rate is low, rate of investment in Pakistan is also lower than in most other developing countries.

The trade is facing a dilemma as Pak exports, because of tough competition and low value-addition, are fetching lower per unit prices, while inelastic imports and rising prices are pushing the import bill upwards.

According to knowledgeable circles, all eyes were set on the developments on the economic front following the IMF mission postponing its visit for indefinite period, as confirmed by the finance ministry officials last Friday.

The team was coming to hold talks and subsequently release 280 million dollars under ESAF/EFF. Since July 1999, Pakistan is waiting for release of the next tranche under ESAF programme that was blocked due to sanctions imposted after the country went nuclear in May 1998.

Experts felt that if the government fails to achieve long-awaited tranche, Pakistan may go into troubled waters if the supply line from the IMF/World Bank is not restored over next two months.

KERB MARKET: On Monday, the rupee picked up two paisa against the dollar at Rs 53.93 and Rs 53.98 for buying and selling. On Tuesday, the rupee maintained its stable trend against the greenback amid balanced demand and supply position. On Wednesday, the rupee remained unchanged for the second day in a row in low activity.

Explaining the sluggish activity in the currency business, dealers said that recent bullish trend in the stock exchange attracted leading investors from currency markets.

They also said that if the stock market depicted any weakness in the near future, the speculative forces of currency business would return to their normal business.

Some dealers observed that the activity came under pressure as most of the market players remained glued to the television set to watch the cricket match between Pakistan and Australia.

On Thursday, the rupee suffered a setback as it showed five paisa loss against the dollar at Rs 53.98 and Rs 54.03 for buying and selling. Money changers were of the view that the increase in the value of the greenback was due to accelerating demand from buyers. The also said that it is a temporary phenomenon and added that the rupee to recover some gains after returning to its previous levels shortly.

On Friday, the rupee shruged off its overnight weakness and recovered three paisa against the dollar at Rs 53.95 and Rs 54.00 following the slight increase in foreign exchange reserve. At the weekend, the rupee maintained its overnight levels against the dollar in low business.