KARACHI, Feb 20: The rupee responded positively to the peaceful elections on Wednesday as it recovered a sizable amount it had lost against the US dollar during the last couple of weeks.

The rupee gained 1.76 per cent as the dollar traded at its lowest level of Rs61.50 before closing at R61.90. The sudden gain by the rupee was surprising for the market, which has been speculating for its weakening.

The rupee gained 15 paisa on Tuesday as the dollar closed at Rs63.01.

It could be a shock for the dollar hoarders, who were the front runner in the game of speculation and were predicting that the rupee would lose further after elections.

“The peaceful elections brushed aside the uncertainty attached with the local currency and the rupee bounced back against dollar,” said Aamir Saeed, a currency dealer.

The currency dealers said that the dollar supply suddenly increased and the buyers avoided entering the market thus causing devaluation of dollar. They said the importers, who were in panic before the elections, were not interested. The dealers said the speculations died with the elections.

Market sources said the massive supply of dollars was due to a payment of Saudi Commercial Bank, which boosted the supply and forced the dollars to shed some weight.

A senior banker said about $150 million landed on Wednesday, which sharply increased the supply causing a substantial devaluation of the dollar against rupee.

The dollar fell to Rs61.50 till mid-noon when the State Bank pulled out the supply from the market creating a shortage and forcing rupee to shed some weight to close at Rs61.90.

“This huge supply of dollars through the Saudi payment is the major reason but still the peaceful elections provided a sense of stability encouraging rupee to gain,” said a currency dealer and added that the same market chewed millions of dollars pumped by the State Bank just before the elections giving no positive response.

Some dealers said that the rupee depreciation during the last couple of weeks was dominated by the speculation and not on the basis of weakening of economy. Most of the dealers have been claiming that the recent fall of rupee was due to weaker economy.

“Whether the devaluation of rupee against the greenback during the last couple of weeks was the reflection of weakening of economy or was simply speculation on the basis of supply and demand, would be more visible in the next couple of weeks, which will see the formation of a new government,” said Aamer Saeed.

The dealers said that the exporters, who held the export proceeds before the elections to gain more also remitted their money to home adding more dollars into the market.

Dealers said if the supply remains high, rupee will remain stable.

They found it satisfactory that the inflows of dollars through remittances were high. In the last seven months the remittances sent by the overseas Pakistanis increased by 22 per cent and it was a record.

“After the formation of the new government, the issue of GDRs (Global Depository Receipts) of several top Pakistani companies would be resolved, which would bring more dollars into the country,” said a research house broker.

The outgoing government has been making efforts in vain to launch GDRs to improve the inflows of dollars, especially in wake of widening trade gap.