KARACHI: The rupee has strong support of the State Bank that is said to be pressurising the banks to keep the dollar below Rs103, said bankers and currency dealers in the inter-bank market.

For more than a week the dollar is hovering around Rs102.80 but could not cross the barrier of Rs103 despite factors loaded against it.

“Keeping itself behind the scene the central bank is using all kinds of pressure and influence to force the banks not to let the dollar cross Rs103,” said Atif Ahmed, a currency dealer in the inter-bank market.

The local currency came under pressure with beginning of political crisis which ultimately delayed release of fifth tranche by the IMF, the key source of dollar inflows for the country, the rupee started slipping unable to hold the position below Rs100 to a US greenback.

Bankers said the declining foreign exchange reserves of both the State Bank and scheduled banks was more concerning, which has softened the confidence over local currency thus shifting the trust more on the US currency.

Currency dealers said the central bank was not allowing big banks to come and trade in the currency market. No bank was allowed to trade at a rate above Rs102.84 on Friday.

“I believe when the market will open on Monday the price could be around Rs102.75-78. This is the way market is being controlled,” said a senior banker.

He said that actual dollar price was higher than the current controlled prices; however, he declined to identify the possible price of dollar if the central bank stops influencing the currency market.

In the last couple of months the dollar gained about 5 per cent against the local currency while showing all potential to gain further if the gets out of influence of the central bank.

The government did a miracle in the second half of the FY14 by bringing back dollar from Rs109-10 to below Rs98 and it sustained for a substantially long period.

“If the IMF releases tranche it will certainly help boost the market sentiment and it will receive as an indication that things are moving in the right direction,” said Atif Ahmed.

It is believed that that with the release of IMF tranche, the export proceeds held by the exporters could see a fast landing.

It was also observed that last week the banks were short of liquidity which compelled many dollar holders to sell their holdings for generating rupee liquidity.

The Sate Bank on Friday injected Rs94bn to supply liquidity for the banks facing a drought.

Bankers said the most the banks were out of dollar reserves in their foreign braches. The banks used to keep dollars in their foreign braches that help them to make quick payments against a business deal.

Published in Dawn, September 28th, 2014