SYED MOHAMMAD TAHIR
LAHORE: Though local currency rupee stabilised its value last week but the cruel fact is that newly-elected government of Pakistan Muslim League (PML-N) remained failed to provide cushion to strong it.
Earlier, it is expected that rupee might become strong enough on the back of new government set-up with clear majority for Nawaz Sharif in parliament and reforms in different departments to mitigate longstanding problems but federal budget against the wishes of masses has kept value of rupee intact if not plummeted. The rupee is still hovering just under 100 against a dollar.
Not only federal budget but there are also some other elements that became catalyst to support melting of local currency.
In six sessions of last week, the rupee remained firm since it has already been ruined against dollar in the interbank market amid quiet trading. The hope of increase in workers’ remittances ahead of Ramadan could keep dollar demand and supply in balance in the coming weeks but some facts are opposing this notion. An inside story revealed that some stalwarts of PML-N government ordered brokers to arrange million of dollars from local open market to send them Congo Republic for a special mission. The dealers and brokers lifted greenback from open market at every fluctuated rate and after achieving target, sent them to Congo Republic. This movement of collecting dollar from open market created panic in local currency world and its value could not be stopped to further melt despite the fact dollar remained sluggish in the world.
After the fall in dollar value in the world, the Indian rupee gained on the back of large dollar selling by exporters in spot and forward markets, ending a tough week that saw the currency slump to a record low as part of a broader regional market sell-off. Last week’s gains were not enough to prevent the rupee from falling 0.8 percent, its sixth consecutive weekly loss, having hit a record low of 58.98 on Tuesday. India’s large current account deficit has made the rupee particularly vulnerable, and its fall was exacerbated after foreign investors sold a net $3.8 billion in Indian debt over the past 16 sessions.
“Better than expected WPI and revised IIP, along with some expected dollar inflows, likely to see the rupee appreciate for the next two weeks or so,” said an expert. In the offshore non-deliverable forwards, the one-month contract was at 57.85, while the three-month was at 58.46.
Likewise, most emerging Asian currencies rose in last week as strong regional shares prompted short-covering. The Indonesian rupiah gained as the government said the country is preparing measures to cope with the reduction of quantitative easing. The Taiwan dollar rose on demand from foreign financial institutions, while bond inflows lifted the Thai baht.
The Philippine peso advanced after the central bank kept its policy rate and special deposit account rate steady. The South Korean won strengthened on exporters’ bids for settlements. “There is still some unwinding of long US dollar positions.
Similarly, the yen rose to its strongest levels against the US dollar and euro since the Bank of Japan embarked on an aggressive economic stimulus in April, as a slide in Japanese stocks triggered an unwinding of bets the currency would weaken. Pakistani rupee should also gain like other Asian currencies but unfortunately there are some other elements that could only stop rupee further falling and not gaining.