KARACHI, Jan 6: Frustrated over falling rates of return on bank deposits and national saving schemes - small savers are making investment in the euro and the pound sterling. The two currencies have been on the rise for several months in the world markets.

Since December 1, 2003 the two have gained eight per cent and six per cent respectively against the rupee mirroring their gains against the US dollar. Some people are also trying their luck in Iraqi dinar but money changers say that the amount of money invested in Iraqi dinar as compared to investment in euro and sterling is negligible.

Money changers and officials of foreign exchange companies say privately that the buying euphoria for euro and sterling may soon die and small savers may end up losing their hard-earned money. Investment in Iraqi dinar carries an even greater risk - the risk of the demonetization of the currency altogether.

"Lately small savers have also started making investment in euro and pound sterling," says head of a big foreign exchange company. "I know for sure that many of those who are withdrawing money from bank accounts or national saving schemes are buying hard currencies," he says. But what he does not say is that people like him at exchange companies and at money changers are hunting for clients who can invest money in foreign currencies at a not-so-favourable time.

Money changers admit privately that they are creating a buying euphoria among small savers to sell out their own stocks of hard currencies before the currencies stop rising and start falling. In the open market the euro and pound sterling were trading at Rs73.20/Rs73.40 and Rs104.40/ Rs104.60 on late Tuesday evening.

Earlier in the day the two currencies traded at Rs72.60/ Rs72.80 and Rs103.50/Rs103.70 respectively. They shot up to new heights after gaining weight against the US dollar internationally. Bankers said the euro touched $1.2800 and sterling reached $1.8270 in New York - up from $1.2677 and $1.8066 respectively.

Dawn inquiries reveal that a number of money changers and a few exchange companies have started forward trading in euro and pound sterling. But officials of exchange companies deny having started it saying that they are not supposed to make forward deals and that all their business activities are well-documented.

But the fact that several exchange companies are currently operating as both money changers as well as exchange companies makes the credibility of such statements doubtful.

The money changers making forward deals issue receipts to the buyers of foreign currencies instead of making physical delivery. The buyers book these currencies and keep waiting for selling them at the right time. When finally they decide to sell, the money changers pay them the profit - i.e. the difference between the buying and selling rates instead of returning their full amount of money: they encourage them to leave the same in their "account" to be used later on for the same purpose.

This goes on and on till the currencies start falling and the investors hurriedly offload their stocks or keep waiting in vain for an upswing. This is more like of the business of so-called representatives of international brokerage houses that currently face action from Securities & Exchange Commission of Pakistan - but only after making millions of dollars.