KARACHI: The dollar fell against the local currency by almost Rs1.5 on Saturday and was trading in the range of Rs116.70-Rs117.30.

The surprise dip in the dollar price in the open market was mainly attributed to, as reported by the exchange companies, the UAE Central Bank’s decision to bound exchange companies to accept only those currencies which have permission from the origin countries.

The official decision of UAE Central Bank was not available but the exchange companies said the decision was taken on Wednesday.

When contacted Abid Qamar, Chief Spokesman State Bank of Pakistan (SBP), told Dawn that the UAE central bank didn’t officially inform us about this decision.

He said it was welcoming that the dollar has come down in the open market. The greenback was being traded as high as Rs119.50 in the open market on Thursday while it stayed at Rs118.70 for the large part during the outgoing week. The currency lost Rs2.2, about 1.8 per cent against the rupee, within three days.

The open market remains active on Saturday while the banks are closed. “The real impact came out from the decision to not allow exchange of currencies without permission of origin countries,” said Exchange Companies Association of Pakistan’s Secretary General Zafar Paracha. The third currencies are taken to Dubai to buy dollars which is a legal procedure.

“Currencies worth millions of dollars are smuggled to Dubai, converted into the dollar and remitted back which is considered as white money,” continued Paracha. He said the decision will have vast impact on exchange rate while smuggling would be curbed.

However. Forex Association of Pakistan President Malik Bostan cited more reasons for the sharp fall of greenback in the local market. He said the exchange companies got about $15 million against the remittances being transacted through them while they also borrowed $1m from SBP.

According to him, the surplus dollar suppressed its demand and hence declined against the local currency. He said the greenback lost attraction and the buyers disappeared from the market with demand lowest on Saturday.

The local currency was twice devalued during this fiscal year — 5pc in December 2017 and 4.5pc in March this year. “For the first time since devaluation, dollar fell against the rupee.” added Bostan.

Currency dealers said the prices of third currencies went back to old rates and are now easily available; this would increase the import of dollars from Dubai and brought back in the form of greenback.

Published in Dawn, May 6th, 2018