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Remittances can save rupee from further depreciation

Remittances can save rupee from further depreciation

SYED MOHAMMAD TAHIR

 LAHORE: The local currency rupee is continuously declining with the passage of time because Pakistan’s exports are plummeting year on year. All economic indicators are showing downward trend except remittances. It is really painful that we could not even achieve last year’s export target of $25 billion that created a panic of buying greenback in the local market. The uncertainty and dollar demand diluted rupee further and it is now hovering near 100 against greenback.

In six sessions of last week, the rupee lost slightly as it has already been ruined against dollar in the interbank market. The hope of increase in workers’ remittances ahead of Ramadan could keep dollar demand and supply in balance in the coming weeks, otherwise it is expected that rupee might go steep down further.

Last week, rupee surrendered its firmness against dollar in the interbank market in the first trading session on Monday. The rupee shed 16-paisa in single day trading to help the dollar climb to Rs 98.50 and Rs98.52, from the preceding weekend’s close of Rs 98.34 and Rs 98.36. However, the rupee posted a two-paisa gain to close the second trading session on Tuesday at Rs 98.48 and Rs 98.50. The rupee extended its gains for the second straight day as it rose by two-paisa on the buying counter and one-paisa on the selling counter to trade at Rs98.46 and Rs98.49 against the dollar in the third trading session on Wednesday.

Gaining almost four-paisa in the previous two sessions, the rupee went lower against the greenback, losing five-paisa on the buying counter and four-paisa on the selling counter in the fourth trading session on Thursday, with the dollar last changing hands at Rs98.51 and Rs98.53. However, in the last trading session of the week on Friday, the rupee got mid-day recovery against the dollar, picking up nine-paisa on the buying counter and eight-paisa on the selling counter to close at Rs98.42 and Rs98.45. The rupee-dollar parity in the open market fluctuated persistently in last week between a high of Rs99.70 on the buying counter and a low of Rs100 on the selling counter all the while maintaining a 20-paisa spread between buying and selling rates through four trading sessions.

The rupee commenced the week with a 10-paisa loss against the dollar in previous week at Rs99.70 and Rs99.90, as it traded at Rs99.80 and Rs100.00 in the first trading session, amid limited dollar supplies in the local market due to the closure of US and European markets because of public holiday.

Many analysts expect that rupee might melt further because country’s foreign exchange reserves are diluting day after day on the back of immediate payments to International Monetary Fund (IMF).

As reserves have been left for only two months and payment to IMF is due in July 2013, it is expected that rupee might cross 100 mark against dollar in the coming days. It is suggested that incoming government of Nawaz Sharif should take on board all stakeholders including expat Pakistanis living in different countries of the world, to play their pivotal part in strengthening economy of the country. As more expatriates would send remittances to their beloved country, the economy of Pakistan would sound more and rupee-dollar parity would remain firm.