KARACHI: Currency speculators have to face massive losses after State Bank’s decision to supply dollars in the open market as much as required.
Though the State Bank has yet not practically supplied dollars in the market but the availability of dollars was enough to liquidate the artificially created imbalances in the exchange rate.
Within two days the price for dollar tumbled by Rs2 leaving no room for speculative forces to stay on. The dollar fell back to Rs88.50 on Wednesday against Rs89.50 on Monday.
The State Bank made it clear that dollars were available for open market but currency dealers said nobody approached the State Bank as the demand suddenly dropped.
The dollar demand fell to normal level. The selling was higher than buying in the open market. The buying is also because of Haj season since the intending pilgrims have been allowed to buy the required dollars from the open market.
“We have dollar demand in the range of $10 million which is normal for the open market,” said Malik Bostan, Chairman Exchange Companies Association of Pakistan (ECAP).
On last Monday, the dollar caught fire when banks purchased $2.5 million for credit cards payments from the open market.
Banks used to purchase dollars for payment on behalf of the credit card holders who pay their bills in US dollars. This buying is usually done on Monday.
“One of the reasons for sudden hike in the dollar prices was the banks’ buying of $2.5 million from open market and the rate was as high as Rs91,” said Bostan. When the banks bought at Rs91, the open market was trading dollar at Rs90.30 to Rs90.50.
Banks’ higher rate for dollar fuelled panic in open market and speculators started using the situation for their benefit.
Currency experts said this shock of loss within such a short period of time will help the local currency to remain strong against unnecessary fears and speculation.
Anwar Jamal, a currency expert, said demand for the greenback rose to $20 million a day, almost 100 per cent more than normal trading.
He held the speculators for artificially boosting bullish sentiments for the greenback and said the gap betweenthe rates in two markets, open and inter-bank markets, should be reduced further.
In the inter-bank the dollar slightly gained as it was traded at Rs87.42 against Rs87.38 on Tuesday. The gap is still more than Re1 per dollar.
The wider gap of Rs2 to Rs3 helped the illegal Hundi business which even offered higher than the open market.
“I think the Hundi business will die again with the sudden fall in dollar demand and prices,” said Anwar Jamal.