KARACHI: Following the disqualification of Nawaz Sharif on Friday, the local currency lost about 1.5 per cent against the greenback in the open market.

The federal cabinet was dissolved as a result of the Supreme Court’s verdict, creating a political vacuum and leaving Islamabad without any government.

Bankers said there was no immediate reaction to the court’s decision. Currency dealers in the banking market noted that the decision created a panic initially as the dollar price started moving up.

“While the market witnessed just five-paisa increase, the State Bank of Pakistan (SBP) stepped in and brought the situation under control,” said a currency dealer.

However, the open market reacted sharply as the rates shot up to Rs109 for selling and Rs108 for buying.

“There were anxious moments, but the (interbank) market managed to stay range-bound, also because import pressure was less than usual,” said Eman Khan of Tresmark, adding that “we are keeping an eye on the kerb market”.

The kerb market was also restricted by the SBP as ousted finance minster Ishaq Dar had earlier asked its participants not to trade the dollar above Rs107.50. The restriction was imposed after a sudden depreciation of 3.1pc in the rupee’s value on July 5.

Following the rupee depreciation that Mr Dar termed a deliberate act to hurt the government, the interbank market was allowed to trade the dollar in the range of Rs105 and Rs107. But the SBP managed to keep the rate around Rs105.40. The ‘strong recovery’ happened after the new SBP governor’s appointment.

Both representative organisations of currency dealers issued the rate as per the SBP’s instruction. But the dollar was traded significantly higher than the rate quoted on their lists.

“There are reports the dollar was traded at Rs108-109 after the court’s decision, but there is no panic in the market,” said Malik Bostan, president of the Forex Association of Pakistan. He said the decision was followed by very low activity.

Currency dealers said the market will settle within a couple of days as the new prime minister and his cabinet take charge.

Trading remained subdued in the currency market as sellers disappeared, resulting in increased demand for the dollar, said Anwar Jamal, another currency dealer.

Published in Dawn, July 29th, 2017