KARACHI: The local currency is once again losing position, with the rupee shedding Rs1.50 against the dollar in the past three weeks.

The market expects a rise in demand for the greenback amid rising tension with US after the recent drone attack.

Currency experts and dealers are deeply concerned about current developments on internal and external fronts.

They fear that if the situation persists, it could further jeopardise exchange rate.

Anxiety in the market has multiplied as some political parties have hardened their stance and threatened extreme actions to express their resentment to US policies on Pakistan.

“The government of Khyber Pakhtunkhwa has given a deadline to stop Nato supplies. It means we should not expect better reply from the US, the IMF, the World Bank and other sources that could help us stabilise our extremely poor foreign exchange reserves and weak exchange rate regime,” said Malik Bostan, chairman, Exchange Companies Association of Pakistan.

On Tuesday, dollar was traded at Rs107.23 in the inter-bank market and at Rs107.85 in the open market. In September, the dollar had hit Rs112 in the open market and Rs110 in the inter-bank.

The dollar is being traded with a price gap of 55 to 60 paisa in both markets, which is alarming as widening gap attracts speculators and creates panic.

However, some currency dealers said the recent statement of State Bank governor about outflow of dollars from the country have created doubts over relatively stable situation during the post-Eid sessions.

The SBP governor on Oct 2 before a Senate Committee said that about $25 million foreign exchange was going out every day from Quetta, Islamabad, Lahore and Karachi airports and the central bank was signing a memorandum of understanding with the Federal Investigation Agency to check suitcases to control the situation.

While the investigation is under way, many currency dealers challenge this figure and hold SBP responsible for creating uncertainty.

They said the entire open market of exchange companies was not more than $25m to $30m. Currency smugglers are bound to buy from open market which is beyond the capacity.

Currency dealers said they were depositing 100pc dollars in the banks before and after Eid but demand is now higher. “Now demand has increased by 40pc in the open market,” said Anwar Jamal, a currency dealer and expert.

However, currency dealers complain that banks were not providing dollars, and rupee was falling as a result due to shortage of greenback.

“We had asked the SBP to either compel banks to provide us dollars in exchange of cash or allow us to bring dollars from abroad through selling currencies (other than dollars) in the market,” said Malik Bostan.

The market was found keen to know about the future of Pakistan-US relations as they see serious consequences in case of worsening relations.

The recent killings in Karachi during the last 24 hours also disturbed the situation.

Currency dealers said general public started buying dollars in this situation to protect their savings.