Rupee dips by 4.5pc against $ in 50 days

KARACHI: The currency market witnessed another free fall of local currency against the greenback with the dollar being traded as high as Rs104.80 in the open market, creating a record gap in the dollar price in the inter bank and open market. Since the inception of new government, the local currency has witnessed a rapid devaluation and lost almost 4.5 per cent against the US dollar in the open market.The inter-bank market which generally accepts the Central Banks influence, to some extent, also recorded a devaluation of about 2.4 per cent.

On June 5, when the new prime minister took oath, the rupee was traded at Rs98.47 in the inter-bank and Rs100.20 in the open market.Currency experts and business community observed that the currency crisis was easy and casual by the government which was not taking serious note of the situation.
A currency expert said the government seems to believe that the situation could come under control once a deal is finalised with the IMF for $6 billion. However, they said the local currency losing fast against US dollar, adding: Any IMF deal may not recover the loss which would have been taken place.
We bought dollar at Rs104.50 and sold at Rs105.80 during the session on Wednesday, said Anwar Jamal, a currency dealer.
The currency dealers said that the demand was high but the physical shortage of dollar was visible in the market. They said small sellers stopped selling dollars hoping to yield more from their savings.
The increasing gap in the dollar price of open and inter-bank market created history for the currency market. The open market is offering almost Rs3.75 more on each dollar compared to inter-bank which is record high.
This high yield of dollar in open market is a threat to the remittances through banking channel. The last five years of the previous government never allowed the gap to be widened more than Rs1.5 in the rates of dollars within the two markets. It helped the inflows of remittances through banking channel and the country received record $14 billion in FY-13.
However, transactions through the illegal channels have started taken place. Informed currency dealers said no one can stop these inflows through illegal channel since profit in the open market is very high.
When asked about the sudden rise in dollar prices on Wednesday, currency dealers said it was also partly because of State Banks recent move that tightened the rules for the exchange companies.
The State Bank issued a circular on Tuesday asking the exchange companies to get and retain copies of any of the following identification documents for all outward transactions and all other transactions of USD 2,500 or above (or equivalent) with stamp of Original Seen.
The companies should follow the instructions by SBP for Computerised National Identity Card (CNIC), National Identity Card for Overseas Pakistanis (NICOP), Pakistan Origin Card (POC), Alien Registration Card (ARC), and Passport (having valid visa on it or any other proof of legal stay of foreigner).