KARACHI: The dollar touched Rs107 in the open market on Monday, widening the gap between interbank and open-market rates to Rs2 per dollar.
“We are forced to sell the dollar at less than Rs104.85. This is the untold official rate that the banks have to use despite the rising exchange rate in the open market,” said Atif Ahmed, a currency dealer in the interbank market.
The Exchange Companies Association of Pakistan (ECAP) reported Rs106.80 as the highest price of the dollar in the open market, although the going rate was Rs107 in different parts of the city.
The dollar price varies in different city areas as well as across the country. ECAP officials said the price may differ, but main currency dealers — known as ‘A’ category exchange companies — sell the greenback at the rate quoted in their daily message to the media.
There was a widespread rumour on Monday that Pakistan was going to demonetise Rs5,000 currency notes, which accelerated the dollar buying. Behind the rumour was the recent decision by the Indian government to demonetise its 500- and 1,000-rupee notes in an effort to crack down on corruption.
“The rumour kept chasing the currency market during the day that the Rs5,000 note would be withdrawn to crack down on dirty money, which suddenly increased demand for dollars and raised their prices in the open market,” said Anwar Jamal, a currency dealer in the open market.
The dollar price increased in the range of 30 to 50 paisa per dollar.
The State Bank of Pakistan (SBP) strongly denied such reports. “This is absolutely wrong that the Rs5,000 note is being demonetised,” said SBP spokesman Abid Qamar.
However, he mentioned that some people are confused about the demonetisation of old-design banknotes of Rs10, Rs50, Rs100 and Rs1,000. The old-design banknotes will cease to be legal tender with effect from December 1. Commercial banks will accept the old-design banknotes up to November 30 only.
The dollar recorded dips against global currencies during the presidential election in the United States. But it soon regained its strength against the euro and the pound: the dollar remained stable in Pakistan and is now moving up against the local currency.
“The inflow of dollars has slowed down, which may be a result of lower remittances,” said an office-bearer of the currency dealers’ association. The lower inflow of, and higher demand for, dollars pushed up their prices, he added.
The price gap of Rs2 per dollar between the rates of interbank and open markets is likely to cause illegal transfers and transactions of the US currency.
Hundi and Hawala businesses have been facing a crackdown in Lahore, which indicates the illegal business is getting strength there.
It can also be a reason for low remittances as the remitter can get a higher rate if money is sent through a non-banking channel.