KARACHI, Aug 19: Heavy selling of US dollars witnessed in the inter-bank market on Tuesday slashed value of the dollar by 3.4 per cent against the rupee.

The inter-bank market reacted to the expectations of currency dealers who predicted that the trend would dominate inter-bank market after a four per cent fall in the dollar value in the open market on Monday.

“A lot of fluctuation was seen in the dollar value and at one time, the dollar fell to Rs73.75, but it gradually increased to Rs74.65 and finally closed at Rs74.35,” said Atif Ahmed, a currency dealer.

Currency dealers at the inter-bank market said the export proceeds started pouring into the market and after a long time the US currency was easily available in the market.

The State Bank last week asked commercial banks to enhance their effort to bring back stuck-up export proceeds.

About $220 million export proceeds are overdue but exporters delayed it illegally to get maximum benefit of devaluation of rupee.

“The sudden appreciation of rupee against dollar, created a frantic situation and exporters and others holding dollars rushed to sell it before a further fall,” said Atif.

Those who held dollar as a safe investment also sold their holdings fearing more losses in the coming days.

Analysts said the sudden depreciation of dollar showed that speculative forces were also active to pump air in the ballooning prices of greenback.

“Now it seems that speculative share in the dollar price has gone and the dollar slipped to strengthen at Rs74 or slightly higher,” said analyst Abid Saleem.

However, other analysts were of the view that the main reason was the resignation of former President Musharraf on Monday which removed uncertainty prevailing for at least 10 months.

Analysts said the resignation restored the market sentiment with the confidence that the economy would get required attention from the coalition government which was busy to settle their dispute at the highest level.

“We believe that the restoration of judges and replacement of current finance minister will be a major change in environment and will be a sign of change for economy,” said I A Jafrey, an analyst-cum-businessman.

The market has an impression that the current finance minister is working on an ad hock basis and failed to make any positive impact on economy.

He, however, was of the view that the recent appreciation of rupee against the dollar was a temporary phenomenon and the dollar would see another appreciation after a week or more.

This is a rush hour and the dollar holders were selling their holdings, but the dollar was not in bulk as it needed to feed importers, said Jafrey.

He said that importers needed at least $3 billion each month which would make the market dry within a few days.