KARACHI: The currency market witnessed the biggest ever single-day fluctuation in the dollar price, which at first jumped to Rs110.50 and then fell back to Rs105.50 in the inter-bank market on Thursday.

After much-awaited intervention by the State Bank, a sum of $50 million to $60m was pumped in the market to arrest the high-flying dollar which lost Rs5 in one go in inter-bank deals.

When the market opened, the dollar started moving up and a panic-like situation gripped the market.

During the first session, the greenback touched Rs110.50, which marked a devaluation of 12 per cent in the local currency since the government’s inception.

The price hike frustrated importers and currency dealers who were confused how to tackle the dollar which did not stay at any single rate for even half an hour.

When the dollar reached Rs110.50, the stakeholders felt that the government needed to take extraordinary action to deal with the situation.

Banking sources did not disclose the exact amount of dollars pumped in the market to salvage the local currency. However, they estimated the amount could be around $50m to $60m.

The State Bank of Pakistan held meetings with the banks to review the situation in the presence of advisor to the finance ministry, Rana Asad Amin.

On Wednesday, the central bank also held meetings with the exchange companies to reduce the dollar price gap between the inter-bank and open markets.

While the dollar touched Rs110.50 in the inter-bank, the currency was priced at Rs111.50 in the open market.

“The right decision of the State Bank recovered rupee and will further improve its position against the dollar in coming days,” said Mailk Bostan, chairman of Exchange Companies Association of Pakistan. He said it was possible to bring down the dollar at Rs100.

But he was surprised at the way the rupee fell during the past 90 days.

“While the country faced sanctions in 1998, Pakistan had only $400m but the local currency did not plunge like it fell during the last three months.”

Atif Ahmed, a currency dealer in the inter-bank market, was unsure that the dollar’s devaluation would continue or the new exchange rates would sustain for long-term period.

However, currency dealers and bankers said the government had several effective tools to influence the market and it should use them now.

Currency dealers have suggested capping the dollar rate like the government did after sanctions in the wake of nuclear test in 1998. The government was suggested to increase the margin on Letter of Credits to 100pc from the current zero percent and stop forward booking of dollars.

The overall market sentiments were depressive and doubts prevailed about the sustainability of the rupee’s recovery.

Topline Securities Chief Executive Officer Mohammad Sohail said the rupee is one of the worst performing currency in Asia since July 1, 2013.

Experts also wanted to know why the dollar was allowed to cross Rs110 while the same decision could be taken earlier to improve the shattering confidence of the market.

The importers bore the brunt of the SBP’s intervention as they had bought dollars at Rs107 to Rs110. They had to book heavy losses after the injection.