KARACHI, May 9: The oil-pegged US dollar cut the size of the rupee by another 3.5 per cent on Friday, the largest cut in a single day, pushing it down to close to Rs70.

Meanwhile, the State Bank stopped exchange companies from taking the UK pound, euro and UAE dirham out of the country. It also asked commercial banks to sell the dollar in the inter-bank in the second session of the market.

“The steps helped the rupee to recover sharply against the dollar to Rs66, but the recovery was short-lived and the rupee again started sliding,” said currency dealers.

They said that before the State Bank intervened, the dollar had touched Rs69.45 and it was in demand at this rate. “Some importers have succeeded in booking the dollar at Rs68 for Monday,” they said.

Both importers and exporters fear trading will be badly hit by a sharp devaluation of the rupee against the dollar -- 13 per cent since January.

“The costly import will bring another wave of inflation in country already under the grip of 13-year high inflation,” said a dry milk importer.

Exporters are equally worried and dispel a perception that a devaluation of the local currency brings boom for them.

They said that over 35 per cent imported constituents were used to produce exportable goods. The costly import makes their products expensive, resulting in loss of market.

The main reason for the outflow of dollars from the country is record oil prices which touched over $125 per barrel in the international market. The huge oil bill has affected the government and the private sector. The day-to-day erosion of the rupee value panicked even household savers.

Open market dealers are buying dollars but not selling them.

An SBP circular issued to the exchange Companies on Friday said it had been decided that all permissible inflows and outflows of exchange companies were to be routed only through FCY accounts maintained with commercial banks in Pakistan.

It said: “All exchange companies are, therefore, required to close all their existing Nostro accounts with banks abroad and bring back the balances held in those accounts into their FCY A/Cs in Pakistan latest by May 31, 2008.

“Further, with a view to focussing exchange companies on their primary function of promoting home remittances, it has also been decided that with immediate effect an exchange company will be allowed to effect outwards remittances on behalf of bona fide customers for permissible transactions only to the extent of 75 per cent of the home remittances mobilised by the company during the preceding month. All exchange companies will report by 5th of every month.”

The SBP warned that failure to comply with the instructions would attract severe regulatory action.