KARACHI: The pound has taken a nosedive and lost 20 per cent against the rupee since Britain’s decision at the end of June to leave the European Union (EU).

Currency dealers said the pound is now highly unreliable. It has lost investors’ confidence and is no more a currency to hold even for a week, they said.

Britain decided to leave the EU in a referendum on June 23, sending shockwaves to global currency markets, including Pakistan, where the pound fell sharply.

Before Britain’s vote to exit the EU – also called Brexit – the pound traded at Rs158.16 in the interbank market in Pakistan. It was considered the strongest currency after the dollar, but the referendum result changed the entire scenario for worse following Brexit.

Britain has yet to leave the EU formally, but the pound remains the worst victim of Brexit. The local market witnessed a sharp devaluation in the British currency against the rupee.

Currency dealers said the demand for the pound post-Brexit has been thin. Travellers and students still need the pound, but the demand has been extremely low, they added.

The pound traded at Rs127.89 on October 14 in the interbank market as opposed to the pre-Brexit exchange rate of over Rs158.

Currency dealer Anwar Jamal said hundreds of people, including currency traders, lost millions of rupees following the sharp decline in the value of the pound.

Although the dollar is the international trading currency, the pound enjoys a fairly large market in Pakistan because hundreds of thousands of Pakistanis are British residents.

Mr Jamal said thousands of Pakistanis spend summer vacations with their families in Britain, which keeps up the local demand for the pound.

“The demand for the pound has significantly fallen during the last four months, as the currency is no more reliable. We believe the pound will see a rise in the near future. It also hurt the euro while making the dollar more reliable,” he said.

Britain has large investments in Pakistan. Remittances from Britain are the highest after Saudi Arabia, United Arab Emirates and United States.

In the first quarter of the current fiscal year, remittances from Britain fell 18pc year-on-year to $546.43 million. The EU is still persuading Britain to stay on in the economic bloc.

No one is sure how long the pound will continue to fall. But its impact on both the EU and Britain is significant. Moreover, Brexit also helped the dollar gain strength, as it remains the strongest currency.

Published in Dawn October 16th, 2016