Reacting to Federal Finance Minister Ishaq Dar’s interview on television that exporters are feeling uncomfortable with a Rs 96 to a dollar parity and that it should be around Rs 98, PKR weakened on Friday by a rupee against the greenback. The interbank trading was at Rs 97.50 while the gap between the interbank and open market rate remained at one rupee due to a massive conversion by Afghan traders in Peshawar.
Those exporters who had sold dollars on a forward basis to banks at Rs 96 were caught off guard. There was very little activity in the morning on the open market as the Minister’s views had a disruptive impact. State Bank of Pakistan had been a major beneficiary of forward purchases of dollars so far. April figure, which is yet to be released forward purchases, is bound to be much lower than the March figure of two billion dollars.
The recent ‘announcement’ by Deputy Governor at the Karachi Chamber of Commerce and Industry about ‘a good news’ in next monetary policy also resulted in poor participation by banks in the recent auction of treasury bills. As against a maturity of Rs 650 billion, bids received were for half the amount as banks are now expected to cover the shortfall in the forthcoming Pakistan Investment Bonds (PIBs) auction. At present, a 10 percent yield on one year T-bills and 12 percent on a 3-year tenor PIB – the yield curve has sharpened. In a bigger scheme of things, the knowledgeable sources are surprised at the lack of sensitivity to speak on exchange and interest rate by responsible functionaries.
The IMF is expected to press for weakening of rupee and not lowering the SBP policy rate in its deliberation with the country’s authorities at the end of the month. Market expects the PKR parity to touch Rs 98 by the next week ie in line with Finance Ministry’s expectations.