Dollar dives by 4% in open market within an hour, raising suspicious of intervention

January 25, 2023 (MLN): Following yesterday’s announcement by the Exchange Companies (ECs) regarding the removal of the dollar cap in the open market, the dollar in today’s open market was reportedly traded at PKR 252.50 [10:00 am] per USD during initial trading hours, however, within an hour, the greenback depreciated to PKR 243 per USD down by 4% [11:00 am] in the open market, raising suspicions of undue intervention from authorities.

The sudden change in the open market has raised concerns among market analysts and has led to a sense of uncertainty in the country's economy. Many are now questioning the role of the central bank and the government in the sudden change in the exchange rate.

The government and the central bank have yet to comment on the matter. However, the rapid depreciation has left many market participants scrambling to adjust their positions and has resulted in a volatile market.

Speaking about the ongoing fluctuation, Malik Bostan, President of the Forex Association of Pakistan said, “Banks are not providing dollars to exchange companies and We have already informed the State Bank about the concerns over the non-availability of dollars.”

He also informed that the rate of dollars in the black market is PKR 252 per USD.

The dollar will now rise in the open market as the effects of removing the cap on the dollar will begin, he added.

He emphasized the need to close the gap between open-market and black-market rates and stated that in the open market, the dollar will be equal to the black-market rate.

On Tuesday, ECs decided to remove the cap from the dollar in the open market as the government’s imposition of a cap on the dollar created a black market. Thus, inflows have been reduced from official channels.

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