KARACHI: The 73-paisa gain on Wednesday tossed the rupee to its highest level during the current fiscal year against the US dollar at Rs157.12 in the interbank market.

The local currency has so far recovered 6.8 per cent in 2020-21 against the greenback on the back of higher inflows and slow demand for US dollars.

The rupee closed at Rs157.12 in interbank market from Rs157.85 on Tuesday. The dollar price recorded a fall of Rs2.97, or 1.8pc, during the last 30 days.

“Not sure how far the dollar will continue to fall but some macro indicators are in support of local currency,” said Atif Ahmd, a currency dealer in the interbank market.

Currency dealers said the demand for dollars was low while the inflows into the banking system have increased significantly which strengthened the rupee.

The exchange rate uncertainty has been a persistent problem for trade and industry particularly exporters and importers. However, the State Bank of Pakistan (SBP) now maintains that the exchange rate is free of any influence and is market-based.

The SBP governor said a number of times that the central bank has succeeded in bringing stability in the exchange rate due to market-based mechanism.

Since the beginning of FY21, the exchange rate came under immense pressure as the dollar rate touched an all-time high of Rs168.8 on Aug 15, 2020.

However, the dollar rate started easing from September 2020 and had gradually been losing its value against the rupee since then.

The Covid-19 related slowdown did have its impact on the economy, but exporters had succeeded to grab more orders compared to the preceding fiscal year which improved the overall inflow with high export proceeds during ongoing fiscal year.

“We could not expect that inflows through the Roshan Digital Account (RDA) would pick pace so quickly as they already have crossed over $600 million within a few months of its launch. The amount is not big but the signs are positive for higher inflows in coming months and years,” remarked a senior banker.

The country also noted a change in the inflow of foreign investment in the domestic bonds (Pakistan Investment Bonds) from November 2020 and the PIBs attracted $137 million so far. Other important factor is inflow of remittances which remained above $2bn each month during the current fiscal year.

Forex Association of Pakistan President Malik Bostan told Dawn the inflows through exchange companies were also higher than last year. He expected that the exchange companies would deposit up to $3bn into banks through export proceeds (against selling of currencies other than US dollar in Dubai) by June 30. Last year this amount was $2.5bn.

The currency dealers in both the interbank and open markets were keenly watching the current account which is still in surplus during the first seven months of FY21 at $912m. However, the current account became negative by $229m in January, a sharp contraction from $652m deficit in December 2020.

Experts see no big improvement in exports in the remaining months of this fiscal year that could have negative impact on exchange rate as well as export proceeds and ultimately the current account could be in deficit by the end of FY21.

Published in Dawn, March 4th, 2021