Pak Rupee: Rates drift lower

Monday June 22, 2009

KARACHI: The rupee resisted sharp fall against dollar on the currency market during the week ended on June 20, 2009, amid rising trend in remittances and foreign exchange reserves. On the interbank market, the rupee lost 40 paisa in relation to US currency for buying and selling at 81.35 and 81.40, respectively.

On the open market, the rupee shed 10 paisa versus dollar for buying at 81.10 and 5 paisa for selling at 81.15, while it gained 30 paisa versus euro for buying at Rs 112.70 and 20 paisa for selling at 113.80.

More declines are expected before the end of the outgoing financial year, but it is also likely that the rupee may halt steep losses versus the greenback. Next week, the rupee may trade in the range of 81.50-81.60.

The rupee moved cautiously versus the dollar as it tried to resist sharp losses despite the fact that demand for dollars was up by importers. However, rising trend in home remittances and foreign exchange reserves assisted the rupee in halting fall versus the US currency.

The weak economic scenario has faded the demand by the exporting countries and it seems that the high cost of production may hurt exports. If exporters get expected incentives in the trade policy, which is likely in July next, then the country's exports might show improvement in the coming days. This factor will help in increasing foreign exchange earnings. Many importing countries of Pakistani items were not able to buy these products due to high cost as compared with other markets.

In fact, Pakistan's exporters were facing tough competition in the world market as their competitors, such as India, China and Bangladesh, were exporting to many states due to cheap rates and better quality factor. According to the State Bank of Pakistan (SBP) weekly statement, the foreign exchange reserves rose to 11.64 billion dollars.

The government said it expected the gross domestic product (GDP) to grow by 3.3 percent in 2009-10, compared with 2 percent in the fiscal year ending June 30, 2009. But many analysts say the target seems ambitious.

Despite the nominal growth rate, Pakistan is in virtual recession as its 170 million population is growing by more than 2 percent annually, and more than a third of the people are living in poverty.


(BRecorder)