KARACHI, July 7: The dollar went up sharply against Pak rupee on Monday as it gained 2.86 per cent mainly because of very high demand resembling to panic like situation.

Currency dealers in inter-bank market said the market witnessed a free fall of rupee against the greenback as no resistance was shown from any quarter even the State Bank remained on the sideline.

In the first session, the dollar gained Re1 to touch Rs71.10, while the second session proved more fatal for rupee as it further fell by 50 paisa and settled at Rs72.10.

The rupee depreciated by 5.6 per cent since first of this moth reflecting a highly weak position of the local currency.

The currency dealers have earlier noted that the rupee-dollar parity has been pegged with the petrol price in the country. They said rupee has started moving fast towards Rs76, which is equal to the price of one litre.

However, it was more crucial situation for the export-oriented industry as the input cost would make their products uncompetitive in the world market.

The export-oriented industry usually consumes 33 to 35 per cent imported constituent to produce export goods.

Some analysts said the devaluation of rupee would not work to boost exports. They said the sharp devaluation against the dollar would not make exporters to take advantage of this situation as the decline was ‘unplanned’.

Currency dealers said there was no sign of intervention by the State Bank to support the falling rupee as it had been a common practice earlier. It simply supports the assumption that the rupee would be allowed to fall to some ‘required position.’

Bankers denied that it was the pressure of backlog of payments at the end of the fiscal 2007-08. They said the actual pressure was the rising demand of the importers who did not want live the counter.

Currency dealers said the State Bank was no more in a position to come out with a bag full of dollars to support the falling rupee. They said the reserves of the SBP have already shrunk to alarming level, especially in the wake of rising oil and commodity prices.

The burden of petroleum prices and widening trade deficit has put more pressure on dollar, while the inflows through foreign direct investment have reduced by 14 per cent.

The SBP shifted 25 per cent to 30 per cent oil import to the private sector, which was another cause of concern for the currency dealers. They said the private oil importers wanted more and more dollars to avoid rising dollar value.

The currency dealers said the tall claims of the SBP and the government that $3.5 billion would flow into the country till end of the fiscal on June 30, 2008, also proved false.

“We have been waiting for the friendly inflows. If the inflows of dollar still remain away from Pakistan, the dollar might see the figure beyond our imagination,” said an analyst.

Since October 2007, the country’s reserves have fallen to $11.3 billion from $16 billion.

The fast depletion requires immediate action to hold the reserves, which are now much lower than the trade deficit.