KARACHI: After more than a month, dollar succeeded to cross Rs99 in both inter-bank and open market on Monday.

With the beginning of Ramazan, dollar fell to below Rs99 and most of the time kept hovering around Rs98.50.

However, for the first time in 40 days, the US currency gained strength to cross Rs99. Political uncertainty and a number of other reasons were cited for the fall of local currency.

“The dollar gained up to 75 paisa, and was sold as high as Rs99.35 in the inter-bank market on Monday,” said Atif Ahmed, a currency dealer in the inter-bank market.

He said the market was panicky due to high demand of the US currency which increased its price.

“But I believe it has no connection with political situation in the country, instead large payments to IMF and oil payments pushed up the dollar price,” said Mr Atif.

The government had to pay $147 million to the IMF as repayment and debt-servicing while $100m was also required for oil payments.

Banking sources said the State Bank bought dollars through small banks on Monday which created both demand and shortage.

The open market also responded in the same tone and the dollar went up to Rs99.20 and Rs99.30. The open market remained calm during Ramazan due to high remittances from overseas Pakistanis.

“The market witnessed more trading on Monday after a long span of cool trading. We sold dollar at Rs99.30 and bought at Rs99.10 to 99.15,” said Anwar Jamal, a currency dealer in the open market.

Currency experts said the high tide would fall on Tuesday and the local currency will strengthen its position.

The State Bank has foreign exchange reserves worth over $9 billion while holdings of scheduled banks are also above $5bn. With such reserves and the remittances of about $16bn received from overseas Pakistanis, the exchange rate held untouched.

“The stock market set the tone for the currency market as well and led to buying of dollars by importers at a frenzied pace, both in ready and forward counters. There was also a payment of $150 million to the IMF. These factors led to the collapse of rupee. However, towards the end of the day, rupee staged a spectacular rebound, to close at 99.10,” says Eman Khan of Aerari, an application that tracks markets.

“The rupee was under pressure due to the political upheavals and once its crossed its support level of 99, it just went in to a tail spin. However, it recovered sharply towards the end of the day to close well above its lows.”

Published in Dawn, August 12th, 2014