LAHORE: The price of the dollar has declined in the interbank market.
According to the State Bank, the dollar became cheaper by one paisa in the interbank market, closing at Rs277.50 after easing from Rs277.51.
In the open market, the US dollar fell by six paisa to settle at Rs279.23. The euro in the open market became cheaper by 20 paisa to close at Rs325.55, while the British pound eased by four paisa to Rs379.93. The UAE dirham declined by one paisa to Rs76.29, while the Saudi riyal rose by one paisa to Rs74.47.
The movements are marginal in isolation, but the stability they represent is the more meaningful observation. A close within a single paisa of the previous session in the interbank market indicates a market operating without material pressure on either side, which is a notable departure from the volatility that characterised the currency in earlier periods.
The gap between the interbank and open market rates stands at Rs1.73, or roughly six-tenths of one percent. That spread is closely watched. A narrow differential indicates that demand for foreign currency is being met through formal banking channels, while a widening gap signals unmet demand migrating to the open market and has historically preceded broader currency pressure.
Maintaining a contained spread has been an explicit policy focus, and it forms part of the structural commitments associated with Pakistan’s programme with the International Monetary Fund, which has consistently pressed for a market-determined exchange rate operating without administrative suppression of the parallel market.
The two markets serve different functions. Interbank trading involves commercial banks settling transactions arising from imports, exports, debt servicing and other formal flows, and it is the rate used for the great majority of the country’s foreign exchange business. The open market is where individuals purchase currency for travel, education expenses and small remittance transactions, and its rates are compiled by the exchange companies’ association.
Cross rates in the open market largely track the movement of the respective currencies against the dollar internationally, adjusted for local supply and demand. The euro and pound both eased in rupee terms during the session, while the dirham and riyal — both pegged to the US dollar — moved only marginally, as their pegs mean their rupee value shifts almost entirely with the dollar-rupee rate itself.
The Gulf currencies carry particular significance for household finances given the scale of worker remittances from Saudi Arabia and the United Arab Emirates, which together account for a substantial share of total inflows. Remittances remain one of the principal sources of foreign exchange supporting the external account, alongside export receipts.
Exchange rate stability has direct consequences for the domestic price level. A significant proportion of Pakistan’s consumption basket is either imported outright or produced using imported inputs, including petroleum products, LNG, edible oil, pulses, industrial raw materials and machinery. Petroleum and LNG prices, in particular, are set in dollars, which means a stable rupee limits the extent to which international price movements are amplified at the point of local sale.
Trading closed with rates broadly unchanged across both markets.
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