KARACHI, July 4: Pakistan’s decision to open land routes for Nato supplies helped the rupee gain strength against the dollar after a long spell of steep fall.
Both the inter-bank and open market hit a good day for local currency as it gained against the greenback on Wednesday amid hopes that inflows from the US and other sources would start soon.
During the last couple of months, rupee lost value by 3.5 per cent against the dollar.
The fall is attributed to market fears that delays in the decision regarding Nato supplies would empty foreign exchange reserves of the country.
As Pakistan stopped Nato supplies in November after the killing of 24 Pakistani soldiers by a US air-strike, the exchange rate was first found under threat.
It led to a nine per cent devaluation of the local currency in the fiscal year that ended on June 30.
Bankers said that the real impact could be there once $1.1billion Coalition Support Funds land into the country. Restoration of Nato supplies, it is hoped, would open other sources for dollar inflows, like IMF and bilateral loans.
A senior banker said the exchange rate would see stability with the inflows, but the bounce back of the rupee is a remote possibility.
Currency dealers in the inter-bank market said that the rupee stopped fall amid news of restoration of Nato supplies and the dollar was traded as low as Rs94.41 on Wednesday.
On Tuesday, the dollar was traded as high as Rs94.80. However, the closing rates of the both days did not show any major difference.
Dealers said the rupee gained 10 to 20 paisas against the dollar.
But most important is that the rupee gained while it continued to lose throughout the fiscal year 2012,” said Atif Ahmed, a currency dealer.
The country’s reserves fell by $3.3 billion from July and most of the fall was noted in the reserves of the State Bank.
According to State Bank’s latest data, foreign exchange reserves of commercial banks increased during the fiscal year 2012 by $909 million to $4.428 billion.
The trade gap of over $19 billion during 11 months of the just ended fiscal year eroded reserves of the State Bank. Reserves are a sign of stability in the exchange market.
“Unlike inter-bank, the open market received the news of restoration of Nato supplies with more enthusiasm as local currency gained 60 paisa against the US dollar for the first time after a long spell of dollar’s domination,” said Malik Botan, President, Exchange Companies Association of Pakistan.
On Wednesday, buyers were negligible and sellers were in the market to dispose of their holdings, fearing a further fall of dollar.
He said 80 per cent were dollar sellers.