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Tuesday, May 28, 2024

Strengthening rupee forces exporters to sell their dollars

Banks are experiencing a surplus of dollars, driven by exporters swiftly selling their earnings in anticipation of further depreciation of the US currency.

With exports posting healthy increases during the past four month as sizable chunk of export proceeds is available with exporters. When rupee is under pressure these exporters withhold the export proceeds as long as possible to increase their margins. But this time around the rupee is showing remarkable strength against the greenback and exporters are off loading their exports proceeds as soon as possible.

In the currency market, some banks are considered export banks due to their large network of exporters, who sell their proceeds to these banks. According to currency dealers, there’s been a remarkable increase in the inflow of export proceeds, exerting pressure on the exchange rate.

“The current situation could have driven the dollar to even lower rates, which would have been detrimental for exporters,” said Atif Ahmed, a currency dealer in the interbank market.

Over the past three months, the exchange rate has gradually strengthened the rupee against the dollar, which closed at Rs277.93 on Thursday. The dollar’s value has decreased by around Rs3 in the interbank market during this period.

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