US dollar concedes some gain after climbing to Rs110 in interbank market

KARACHI: The market on Friday was shaken after both the interbank and open market rates of US dollar witnessed a sharp rise, trading around Rs110.

The US dollar went up by Rs4.5 in the interbank market and Rs1.5 in the open market as the day began. However, it is currently trading between Rs107.8 and Rs108.8 in the open market.

As result of spike in the dollar rate, the volume of loans on Pakistan augmented by whooping Rs 400 billion whereas price of petrol and diesel were likely to go up by at least Rs3 per liter.

A spokesperson for the State Bank of Pakistan (SBP) said that market forces set the rate of the dollar, after keeping in view the demand and supply. “The SBP is monitoring the overall situation and the bank would intervene if need be,” he added.

The increase in the dollar rate surprised the market, particularly after the SBP announced receiving $2.5 billion earned from the global capital markets after issuing Sukuk and Eurobond.

Issuance of long-term bonds 

Last week, Pakistan raised $2.5 billion earned from the government issued the five-year Sukuk (Islamic bond) and the 10-year Eurobond at relatively lower rates.

It was the first venture into foreign capital markets since the outbreak of major political turbulence in the country.

A five-year Sukuk Al-Ijarah and 10-year Eurobond fetched the highest-ever amount for Pakistan in a single such attempt abroad despite unstable political situation in the country.

Economists then predicted that $2.5 billion injection would provide a breathing space to the government for its apathy to turn back to the International Monetary Fund (IMF) ahead of General Elections 2018.

Last year, the government raised $1 billion through a five-year Sukuk at 410 basis points above the five-year US Treasury bill, whereas that spread was 365 bps this time around. The yield on the 10-year bond was down by 1.6 per cent from the last 10-year bond floated by Pakistan in foreign capital markets.