Bankers and currency dealers said the local currency was being devalued as a 'policy' to remain competitive on export front.– File Photo

KARACHI: The US dollar continued its advance against the rupee for the second consecutive day on Tuesday, but the bankers and currency dealers said the local currency was being devalued as a 'policy' to remain competitive on export front.

The dollar traded at as high as Rs88.35 from Rs88.04 on Monday. The rupee has lost 2.7 per cent against the US unit just in a month.

“Recently India, Sri Lanka and Bangladesh have adjusted their currencies downward against the US dollar which makes their exportable products cheaper in the region,” said Atif Ahmed, a currency dealer in the inter-bank market.

He said this could be a reason that the State Bank was not coming to the rescue of the rupee. Though the rupee is not pegged to the US dollar and floats independently, the SBP is used to intervene to keep the exchange rate manageable.

A senior banker said it seemed that the rupee was being devalued as a 'policy matter' as the local currency had appreciated by Rs2.25 this month. “Three to four per cent devaluation of the rupee will be enough to remain competitive among the regional currencies,” he added.

Bankers said the exporters used to hold the export proceeds for certain period to get maximum benefit of the devaluation.

Meanwhile, the exporters have to face new problems on both internal and external front. The serious energy crisis coupled with deteriorating law and order situation in the country and devaluation of regional currencies made the Pakistani products costlier on the international market.

On the other hand, the imports had been increasing abruptly that may upset the balance of trade. In the first four months of this fiscal the imports were 24 per cent higher over the same period last year.

“Rising trade deficit, shrinking inflows of dollars (loans, aid) and increasing debt servicing have already started impacting the country's foreign exchange reserves. The issue of reserves would be serious in next two months,” said Mohammad Imran, a researcher and analyst.

Bankers said most of the banks' had been facing shortage in Nastro account (banks are allowed to keep certain amount of dollars in their foreign branches) which is also a reason for higher demand of dollar in the inter-bank market.

The open market did not show any significant change and the dollar was traded at Rs88.10, much below the price in the inter-bank market.