KARACHI: While the interbank exchange rate remained stable, the open market witnessed a sharp increase in the US dollar rate to close at Rs117 on Wednesday.

The dollar hit the highest rate for the second time after it closed at Rs117 on March 20, the day when the local currency was depreciated by 4.5 per cent in the interbank market.

The currency dealers in the open market had diverse views about the increase in the dollar prices. “The demand for dollar is high as undeclared money is being invested in the US currency,” said Malik Bostan, President Forex Association of Pakistan.

He said the money which was being used for investment in the property sector has been diverted towards the currency market after amnesty scheme was announced. As per the scheme, no property deal worth Rs4 million is possible without declaring the source of income.

“Both undeclared legal and illegal money is chasing the dollar,” added Bostan. However, others said the demand for dollar was high due to a short supply in the open market. “The smuggling of currencies is very high these days as the illegal money has found an easy way for its whitening after announcement of the amnesty scheme,” said Secretary General of Exchange Companies Association of Pakistan, Zafar Paracha.

He said that currencies other than the US dollar are very costly in the local market. These currencies are taken away by dealers to Dubai and brought back in the form of dollar, which is an official procedure.

“The cost of other currencies is almost equal to Rs117.50 per dollar in the local market, indicating that smugglers are buying heavily at higher rate,” he commented, adding that once these currencies are sent out from the country, they would be brought back for whitening with small penalties under the amnesty scheme.

He said the volume of trading has dropped during the last few sessions, suggesting that the demand is not very high for the greenback.

Currency dealers said that after the condition imposed by the government that a deal worth Rs4m requires revealing sources, money is being invested in prize bonds and other government’s saving schemes. They said gold is also attractive for investment which is currently at a 5-year high in the country.

Published in Dawn, April 19th, 2018