June 11 -
State Bank hikes discount rate by 1%
The inevitable has happened. The State Bank has raised its
repo or discount rate by one per cent to 14 per cent, effective from June 7,
says an SBP circular. The central bank had to take this decision to keep the
rupee from falling further. The local currency had lost about four per cent of
its value against the US dollar in inter-bank market in two weeks, before making
a dramatic recovery of two per cent, on Wednesday.
SBP repo or discount rate is the interest rate at which it
lends money to banks for up to three days against government securities. Senior
bankers said the rupee opened at 64.30 to a US dollar on Wednesday but rose to
63.00/63.10 toward normal closing of inter-bank foreign exchange market thus
showing a major recovery of two per cent in a single session. In post closing
transactions meant for next day the local currency gained further and was quoted
as high as 62.40 to a dollar. Bankers said what enabled the rupee to recover
grounds, so impressively, was heavy dollar selling in the market initiated by
Citibank with other local and foreign banks following the lead.
For the past two weeks many banks had been buying more and
selling less dollars anticipating further decline of the rupee. In doing so,
they were naturally contracting the space allotted to them, under net open
position rules, for further buying. On Wednesday several banks ran out of this
space and had no option but to sell dollars thus allowing the rupee to make a
quick recovery. Senior bankers said what else drove even those banks that were
well within their net open position limits, was the one per cent increase in SBP
repo rate. They said the increase was a clear signal from the central bank that
it would not let the rupee slip further.
On Monday, SBP had sent a relatively mild signal to this
effect by providing $40 million plus dollars to a state-run bank for debt
servicing of a state-run refinery. But despite this move the rupee had lost 35
paisa to a dollar in inter-bank market to close at 64.20/64.25.
Rupee up 1% in inter-bank market
The rupee on Thursday gained 70 paisa or one per cent against
the US dollar in inter-bank market on renewed supply of dollars, on relatively
low demand. Bankers said the rupee finished at 62.30/62.40 to a dollar at the
end of normal trading hours in inter-bank market up 70 paisa over the previous
close of 63.00/63.10. The rupee regained more of its lost strength as local and
foreign banks continued to sell dollars on renewed supply. Bankers said the
pro-rupee sentiment was strong as at one time it was quoted as high as 62.10 to
FCY cash reserves
The State Bank said on Saturday it would pay banks and
non-bank financial institutions 3.06 per cent return in June on the 20 per cent
special cash reserves on their foreign currency deposits.
On April 2 this year the State Bank freed up foreign currency
deposits of banks placed with it allowing them to use the same in local or
international markets. But it also asked them to keep 25 per cent of their total
foreign currency deposits as cash reserves in foreign currency.
SBP promised that it would pay banks and NBFIs a monthly
return on 20 per cent special cash reserves making it clear that the remaining
five per cent being mandatory cash reserves would earn no return.
Reserves rise by $75 million
Pakistan's liquid foreign exchange reserves rose by $75
million to $2.395 billion on June 2 from $2.320 billion on May 26. The State
Bank said in a statement on Thursday that the total reserves included $1.319
billion held by the central bank and $1.076 billion held by all other banks.
On May 26 SBP reserves stood at $1.256 billion whereas all
other banks combined had $1.064 billion.
Saudi Pak okays Rs 955mn financing
Saudi-Pak Industrial and Agricultural Investment Company on
Wednesday approved a total financing of Rs955 million to 20 companies. The
financing includes Rs406 million for 11 companies in the manufacturing sector
and Rs549 million for 9 companies in services , communication and financial
sectors. This was in addition, equity investment of Rs105 million was approved
for companies in the financial sector.
Gold falls as rupee gains strength
A three per cent appreciation in rupee value against the
dollar in last two days has brought down the gold prices by Rs78 per 10 grams to
Rs5,626 per 10 grams from Rs5,804 on Monday.
The price of ten tola bar or biscuit also plunged by Rs1,500
to quote at Rs66,500 as compared to Rs68,000 on Monday, bullion dealers said.