The rupee continued its upward trajectory against the dollar in the interbank market on Monday, with the local currency’s rise being attributed to a crackdown launched against hoarders and outflows of the greenback through illegal means.

The local currency closed at Rs301.16 in the interbank market after gaining Rs1.86 against the previous close of Rs302.95, according to the State Bank of Pakistan.

Tahir Abbas, head of research at Arif Habib Limited, explained the decline in the dollar’s value as a consequence of the crackdown.

Last week, caretaker Prime Minister Anwaarul Haq Kakar said a crackdown to prevent cross-border smuggling was initiated across the country.

Likewise, interim Interior Minister Sarfraz Bugti reiterated the caretaker government’s resolve on Sunday to take elements involved in smuggling and hoarding to task, including those accumulating dollars.

“We are announcing prize money for those people … who become our informants and tell us where smuggling and hoarding, [including] of dollars, is happening,” he said during a press conference yesterday.

The interim government’s initiative is in line with Chief of Army Staff Gen Asim Munir’s assurance to the business community earlier this month of fostering transparency in dollar exchange and interbank rates.

Meanwhile, the State Bank of Pakistan has also stepped up supervision of the foreign exchange market, ordering banks to set up separate entities to conduct forex transactions and extending a clampdown on hard-currency hoarders and smugglers.

The central bank has also decided to introduce structural reforms in the exchange companies’ sector to provide “better services to the general public and bring transparency and competitiveness”.

“These measures have stopped the capital flight […] and there’s now an excess supply of dollars in the market,” Abbas explained, adding that there were reports of the positive outcome of these initiatives in the open market as well.

Moreover, reports of increased vigilance of the Afghan transit trade also contributed to the rupee’s rise, he said.

Abbas added that if the government continued with these measures in a “sustainable manner”, further improvement could be seen.

Mettis Global Director Saad bin Naseer shared similar views, saying the rupee’s upward momentum was a consequence of action against hoarders.

“Due to strict vigilance by relevant authorities, exchange companies were now also supplying more dollars to the interbank,” he added.

“The rupee’s upward trajectory will sustain as long as they continue to track hoarders and punish those who are involved in destabilising our country.

“With the continued implementation of existing laws, we will see more dollar inflows through official channels rather than hawala and hundi.”

“At this time, to discourage such practices, the government should introduce a scheme for home remittance for people who send money through official channels,” he added.

Similarly, Tresmark’s Head of Strategy Komal Mansoor said a flurry of administrative measures during the last two weeks had “worked wonders” for the market as the grazed the 300 mark again today.

“We also see a lot of verbal reinforcement of these measures,” she said, adding that however, the market did not expect sustained or significant gains and the rupee may consolidate around the 295 level in the near term.

“What happens in the upcoming monetary policy committee on September 14 and the level of administrative supervision will be pivotal for the future course of the currency,” Mansoor said.

Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan, also linked the rupee’s rise to measures taken by the government and particularly lauded the army chief in this regard.