Banks accused of manipulating rupee-dollar exchange rate

WEB DESK: In a recent twist of events, the Pakistani rupee (PKR) made a remarkable recovery against the US dollar (USD), overturning a decline that had puzzled experts.

The initial drop in the PKR’s value, which has now been rectified, was purportedly orchestrated by specific banks engaging in manipulative practices.

Thursday witnessed a significant turnaround for the rupee, strengthening both in the interbank and open markets with notable margins.

Strangely, this positive shift occurred without any discernible alteration in the underlying market dynamics.

This reversal exposes the involvement of certain commercial banks that collaborated to manipulate the currency market, aiming to maximise their gains and profits.

Historically, these banks had managed to inflate their profits without facing any consequences or being subjected to windfall gains tax, successfully thwarting attempts by authorities to curb their activities.

Reports suggest that these banks, in collusion with other stakeholders, functioned as cartels. They artificially inflated the interbank dollar rate to enhance their profits on pending Letters of Credit (LCs) from importers.

Moreover, they intentionally delayed these LCs to create an artificial scarcity of US dollars in the market, consequently driving up the interbank dollar rate.

Amidst pressure by importers and concerned stakeholders, these banks attributed the rising dollar rates to the government’s forthcoming payment installment to the International Monetary Fund (IMF) in November.

However, investigations revealed that there was no actual shortage of dollars in the market, as money changers continued to receive substantial inflows.

According to Geo, the chairman of the Exchange Companies Association of Pakistan (ECAP), Malik Bostan, pointed fingers at this manipulation.

He stated that concerted efforts were made to convert gains into losses by deliberately weakening the rupee against the dollar. Bostan expressed optimism, noting the rupee’s recovery on Thursday and anticipating its continued positive trend in the days ahead.

Another expert concurred with the assertion of alleged manipulation by banks. He highlighted that decisive actions taken by relevant authorities contributed to the improvement of the rupee-dollar exchange rate in both interbank and open markets.

Read more: Here’s how much Pak Suzuki earned in three months

Meanwhile, independent economists acknowledged the government’s positive administrative steps, which had yielded favourable outcomes.

However, they cautioned that the sustainability of these gains hinges on the economic managers’ ability to generate consistent dollar inflows, which is crucial for pulling Pakistan out of the ongoing dollar liquidity crunch.

The coming days will test the resilience of these measures in the face of ever-changing market dynamics.