KARACHI: Falling demand for dollars in the open market has pushed its price below the target set by the State Bank of Pakistan (SBP).
The dollar traded as low as Rs111.20-Rs111.50 in the open market on Saturday - its lowest since touching the record high of Rs113.
Earlier, the SBP asked the representatives of the exchange companies to bring down the dollar price to reduce the gap between the rate of open and interbank markets to just 1 per cent.
However, the current gap is even less than 1pc due to a steep fall in the demand but currency dealers said the low demand could be a temporary phenomenon since trade with China has fallen to its lowest levels due to the ongoing Chinese New Year vacations.
The currency dealers in the interbank market said the dollar traded at Rs110.55 on Friday - the last trading day. Bankers said the SBP was strictly maintaining the exchange rate and hasn’t allowed even a single paisa appreciation for dollar during the last couple of weeks.
The exchange companies have been reporting a gradual fall in the dollar rates against rupee in the open market. During January, the dollar was in high demand due to trading with China.
“I believe the demand could rise once again with the opening of trade with China in March.
“The dollar could slowly gain since the greenback has substantially lost internationally against other major currencies,” said Malik Bostan, President Forex Association of Pakistan.
During the past one year, the dollar lost about 10pc against the major currencies which also led to a low demand in the Pakistani open market. However, this week the dollar has gained about 2-3pc against other major currencies.
“The dollar prices are on a decline but I observed that common Pakistanis are buying dollars as safe deposits. This is the reason that by the end of the day we used to sell out our entire dollar stocks,” said Anwar Jamal, another currency dealer in the open market.
The latest official data show that Pakistan’s trade deficit for the first seven months (July-January) of FY18 has widened by 24.2pc to $21.546 billion, indicating the demand would be higher in the coming months.
The trade deficit would further widen the current account deficit which is met through the foreign exchange reserves of SBP.