USD to PKR: Dollar rise by Rs 3 and trading at Rs162 in the interbank market on Wednesday, the highest level against the Pakistani rupee since June 2019.
Market sources reveals, that the increase in dollar’s price can be linked to the State Bank’s decision to reduce interest rate by another 150 basis points, bringing to 11%.
Decline in interest rate means foreign investors are selling T-bills and taking their money out in the form of dollars, which pushed demand up, resulting in a rise in the price of dollar
One more reason which is resulting in this rise in the price of dolllar is import orders. When the interest rate is cut, importers place orders and buy dollars, which also increases the demand for the foreign currency and it becomes expensive.
According to Sami Tariq, Head of Research and business development at Arif Habib Limited, “This should be temporary. As commodity prices are down, yield differential will attract investments again. However, risk aversion at present is resulting in appreciation of the dollar against other currencies.”
This is highest price at which dollar is trading since June 2019. During these seven months dollar was trading between Rs 154 -159 showing no siginificant spike in its price.
The government on Tuesday also announced a Rs1.2 trillion package to support the economy amid coronavirus lockdown across Pakistan. Around Rs200 billion has been allocated for labourers and Rs100 billion tax refunds will go to exporters and industry.
In the international currency market, the dollar price has dropped against other currencies. The euro traded at $1.0808 up 0.15pc after four straight days of gains. The dollar dropped 0.3pc against the yen to 110.85, off a one-month high of 111.715 touched the previous day.