KARACHI, Oct 23: The rupee gained further strength both in the inter-bank as well as open currency market as the dollar selling spree intensified on press reports, indicating sufficient inflows in the coming days.

With the rapid recovery of the rupee on Monday and Tuesday, the spread between official and kerb exchange rates narrowed to only 20 paisa per dollar.

Bankers said the rupee finished at 61.70/61.75 to a US dollar for ready buying and selling in the inter-bank market up five paisa from the previous close of 61.75/61.80. On Monday, the rupee had 35 paisa against the US dollar after Pakistan got indications from the US and the UK of more aid flowing in in the coming days.

Bankers said the rupee had risen to even 61.60 to a dollar in tomorrow value. The 40 paisa gain that the rupee made in two days against the dollar “shows the confidence of the market players in the local currency,” said Foreign Exchange Adviser of the State Bank Zafar M. Shaikh.

In the kerb market also the rupee gained 25 paisa more against the US dollar, and closed at 61.70/61.90 for spot buying and selling on Tuesday.

This brings the total recovery that the rupee has made in two days to 70 paisa.

Money changers said the rupee gained in kerb market as many a speculator offloaded their dollar holdings fearing a further fall in the value of the greenback. They said that aggressive dollar selling was seen in Peshawar and Islamabad. “Maybe people there are keeping themselves liquid in the wake of the ongoing war in Afghanistan,” a leading money changer based in Karachi told Dawn.

Money changers say American intelligence agencies are also selling dollars to raise rupee funds for winning over the support of tribal people against the ruling Taliban militia of Afghanistan.

The fall of the dollar in inter-bank as well as open currency market has narrowed the gap between the official and the kerb exchange rates to merely 20 paisa. “This is sure to attract more overseas Pakistanis to send their money back home through banks rather than through hundiwalas,” said a senior central banker.

Traditionally the gap between the two rates ranges between Rs2-3 per dollar serving as a big disincentive for the overseas Pakistanis to use official channels for remitting their money back home.

Official estimate shows that overseas Pakistanis send about $7-8 billion back home every year but only $1 billion comes through banking channels and the rest through open market and hundiwalas.