April 27, 2008	Sunday	Rabi-us-Sani 20, 1429

KARACHI, April 26: Speculators dumped dollars in the open market, causing a big slash of 90 paisa in greenback’s value.

The ‘panic buyers’, who were flocking the market till Friday, suddenly disappeared on Saturday.

The open market witnessed a major change after the State Bank’s assurance to supply dollars in the open market to meet the shortage. However, moneychangers said even before the entry of the SBP in the market, supply situation of dollar improved.

According to reports, currency speculators, who were investing heavily in dollars to make quick gains, rushed to the market to get rid of their costly currency, fearing a substantial loss.

“The dollar was traded at Rs64.90 in the open market, down from Rs65.80 on Friday,” said a moneychanger.

The currency market remained open for half day on Saturday, and moneychangers said most of the time they dealt with sellers of dollars while buyers disappeared surprisingly.

“Despite a half-day, dollar was sufficiently available in the market while buyers were not available,” said Malik Bostan, a well known moneychanger.

He also confirmed that the SBP could not supply its promised dollars to the open market due to short timing (half day) on Saturday.

“The real impact will come on Monday and then on Tuesday. The SBP will supply $250,000 on Monday while TT (Telegraphic Transfers) will come on Tuesday,” said Mr Bostan.

He said at least $30 million is expected to come through TT on Tuesday and the dollar would shed more weight in the coming days.

The fast appreciation of dollar against the rupee had turned into a panic-like situation which helped speculators mint money; however, the decline was not limited to the open market.

The huge oil bills and importers’ rising demand were the real factors behind devaluation of rupee in the inter-bank market, building pressure on open market to move fast.

But the speculators accelerated the pace in such a way that the SBP decided to supply dollars to cool down the hot environment.

Dealers, who trade in currencies in the inter-bank market, were not very hopeful that the dollar would further recede against the rupee.

“The inter-bank market is far larger than the open market which can be around $200 to $250 million. This market requires huge supply of dollars while a long queue of importers can be seen in banks to get as much as possible,” said Atif Ali, a currency dealer.

The SBP has been doing swap in the inter-bank market which means it sells and then buys, thus not allowing appreciation of the dollar; however, this practice failed as the SBP did not pump dollar into the market, fearing loss of foreign exchange reserves which have declined by $2 billion since the beginning of this year.

Currency dealers said the devaluation has completed its phase and there was no chance for the rupee to regain its position which it maintained six months ago.

“Each day State Bank’s foreign exchange reserves are declining. The trade and current account deficits have clouded over the economy, putting pressure to spend whatever the country has to meet the deficits,” said a researcher at a brokerage house seeing no improvement in the rupee value.

“We can hope that the dollar will settle around 64 which is obviously a big devaluation of rupee,” he said.