The US dollar, in a surprise development on Friday, came down more than Rs3 against the local currency within 20 minutes.
The dollar stayed at this level before banking operations suspended, owing to a stricter lockdown for Friday prayers.
“The dollar may further retreat to the Rs160 level today or first thing next week,” said Forex Association of Pakistan president Malik Bostan. “The finance ministry has estimated its dollar outlook at Rs160 for the next fiscal year expenditure which was less than the current valuation.”
He added that this outlook is unprecedented because usually their estimates are higher than the current exchange rates. “The government knows the dollar will come down below the Rs160 level soon.”
The emergency interest rate cut Thursday was supposed to prompt foreign investors to sell their securities and buy dollars but this didn’t happen, said Zafar Paracha, the general secretary for the Exchange Companies Association of Pakistan. “The IMF support package prospects and the deferment of the repayment schedule has stabilized Pakistan’s economic outlook,” he added.
Bostan said that the usury market, despite the rate cut, is lucrative for foreign investors as interest rates were still profitable and with the local currency’s recovery, investors will be able to buy more dollars when their securities mature.