KARACHI: The local currency plunged to record low against the dollar on Tuesday and, according to analysts, the rupee’s free fall does not seem to end in the near future.

The greenback was traded as high as Rs105.30 in the inter-bank market and Rs106 in the open market.

The securing of $6.6bn loan deal with the IMF and release of first tranche of $540 million could not help to check the falling trend in the rupee value against the dollar.

Market experts said the dollar could go even higher since the demand has been rising while the reserves are shrinking.

Currency dealers said that the additional factor of Hajj had also sent the dollar’s demand skyrocketing as the government was providing travellers’ cheques to Hajis at a rate of Rs108 per dollar sending a negative signal to the market.

They said the higher rate of dollar for travellers’ cheques was due to banks’ commission on it, but the rate is still higher.

“We believe 150,000 Hajis require $700 million to $750m for their consumption which has put pressure on both the inter-bank and open markets,” said Malik Bostan, chairman of Exchange Companies Association of Pakistan.

Currency dealers said the IMF deal remained ineffective for the exchange rate mainly because of “meagre” first tranche and the conditions came attached with it.

The IMF provided just $540m in the first instalment while the country was expecting $2bn to support its ailing foreign exchange reserves. State Bank’s governor recently said the central bank was unable to intervene in the inter-bank market because of poor foreign exchange reserves.

The SBP has been an effective tool to control the fluctuating dollar prices by pumping additional dollars in the market to cool down the demand. But low reserves are preventing the central bank from playing its role to strengthen the exchange rate regime.Currency dealers said the SBP is also buying from the banks, which was one reason for shortage in markets.

Currency expert Atif Ahmed said there was no clear picture about the fate of the currency and future exchange rate. He said the free fall of the local currency “has no barrier”.