KARACHI: The dollar on Friday continued losing its value against the rupee, dropping even below the interbank rate suggesting ample supply of the US currency in the open market, dealers said.
They cited stability in the result of general elections was the key reason for the appreciation of the local currency.
Forex Association of Pakistan President Malik Bostan said the dollar was traded as low as Rs126-126.50 in the open market – well below the interbank rate of Rs128. Since Monday, the dollar has lost Rs4.30.
The interbank market remained relatively calm with slight fluctuations as it closed at Rs128 versus Rs128.40-128.50 on July 24, a day before the national polls.
Greenback was selling at lower than interbank rate
However, another major reason was the State Bank of Pakistan’s strict action against movement of cash from one city to another – implemented from July 24.
“Since we can’t move cash from one city to another, it created a shortage in the market which is why the dollars are available but there is no cash to buy them, and so the greenback lost value” said Exchange Companies Association of Pakistan Secretary General Zafar Paracha.
On July 6, the SBP issued a circular restricting intercity cash movement by the exchange companies. The decision came after the enlistment of Pakistan in the Financial Action Task Force grey list in June for terror financing and money laundering.
The enlistment jolted the exchange rate with a high degree of instability that shot up dollar prices and demand in the market.
Paracha said that due to general elections in the country, borders with Afghanistan were sealed – blocking smuggling of dollars from Pakistan. As a result, more greenback is available locally.
Currency dealers said the general public have rushed to sell their holdings, which was another reason behind the falling dollar rates.
“Within two days, our export of third currencies (other than dollars) increased to $4 million while it was almost negligible before general elections,” said Bostan, adding that the export of these currencies will bring back dollars in the country.
“In the open market, 80 per cent are sellers of while the rest are buyers,” he continued.