KARACHI: Exporters are increasingly selling dollars in the forward market to hedge against risks associated with a managed exchange rate, currency dealers said on Friday.
Despite a mild appreciation of the rupee against the US dollar, uncertainty surrounding the exchange rate continues to prompt exporters to lock in future rates, as they fear potential volatility once current controls are eased.
Dealers in the inter-bank market said the exchange rate could shift if exchange rate management is relaxed. The prospect of International Monetary Fund (IMF) scrutiny over currency controls also adds to market concerns.
The Exchange Companies Association of Pakistan reports daily gains in the rupee’s value against the dollar, typically in the range of one to three paisas. However, currency dealers noted a sharp drop — between 50 to 60pc — in cash dollar sales by exchange companies.
Open market greenback inflows fall sharply
Some major open-market dealers said that dollar inflows have nearly dried up. Overseas Pakistanis, who previously sold dollars in the open market, are now holding back — a trend dealers describe as new and concerning. One dealer speculated that dollars intended for the open market may be diverted to informal channels.
Authorities remain vigilant. The State Bank of Pakistan (SBP) and the government have maintained strict oversight to prevent illegal currency activity. Dealers said sales of dollars by exchange companies to banks have also declined sharply, while inflows through authorised money changers are down. However, remittance inflows via formal banking channels have remained stable compared to the same period in FY25.
Bankers stated that the decline in dollar sales in the open market is not linked to changes in government incentives for banks and exchange companies. Official data shows no decrease in remittances during July and August.
While the government has made efforts to lower the exchange rate, it has not achieved the desired results. Following crackdowns earlier in the current fiscal year, the dollar has weakened against the rupee in both the inter-bank and open markets.
Currency stability has been supported by the SBP’s higher foreign exchange reserves, steady remittance inflows, and improved diplomatic relations with the United States and China.
However, exporters’ growing use of forward contracts suggests ongoing concerns about exchange rate management.
The SBP has maintained market liquidity rather than suppressing it to lower the rupee-dollar rate artificially.
Dealers said the central bank has slowed its dollar purchases from the inter-bank market to avoid putting pressure on the exchange rate. Still, the risk of renewed central bank buying remains a factor prompting exporters to hedge in the forward market.
Published in Dawn, October 5th, 2025
