The rupee fell 2.6 per cent against the US dollar in the open market on Monday, changing course after appreciating sharply towards the end of last week.

According to the Exchange Companies Association of Pakistan, the greenback closed at Rs308 in the open market, an increase of Rs8 from Friday’s close.

Analysts said today’s price movement came on the back of a shortage of dollars in the open market, attributing it to “hoarders” holding onto the foreign currency in anticipation of further depreciation of the rupee.

“People who have bought the currency at up to Rs310 are not selling, they are going for the wait-and-see strategy,” said Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan.

He said that the State Bank of Pakistan’s (SBP) strategy to allow banks to acquire US dollars from the interbank market for the settlement of card-based cross-border transactions with the International Payment System should have brought down the price by around Rs10 to Rs20.

Following this allowance by the central bank on Wednesday (May 31), the rupee had gained around Rs15 in the open market the next day. Analysts had expected this move to narrow the dollar price spread, which had risen to almost Rs30, between the kerb and interbank markets.

While that seemed to be happening a day after the central bank’s announcement, Paracha noted that today the price had taken the opposite direction, with the local currency losing Rs5.

“If the [SBP] circular is implemented properly then the gap (between the interbank and open market dollar rate) can fall,” Paracha said.

He said the government’s policies concerning the foreign exchange market were in conflict with each other and “blaming anyone would not solve the problem.”

“If the government’s policies are not on one page then it would be impossible to get the desired results … We should learn from the example of Sri Lanka that trying to control the market would only increase the prices in the grey market even further. We have been seeing this for the past 20 years,” Paracha said.

Komal Mansoor, head of research at Tresmark, said that the pressure on the open market will continue to increase as many imports are being conducted through “hawala/hundi” channels where the demand largely outstrips the supply.

Meanwhile, the rupee depreciated by 0.18pc against the dollar in the interbank market. According to the State Bank of Pakistan, the dollar closed at Rs286.19 in the interbank market compared to Friday’s rate of Rs285.68.