KARACHI: Currency dealers said that the fall in dollar demand and disappearance of dual rates in the open market are the outcome of election magic.

While the inter-bank market is in pressure due to IMF payments, the open market is relaxed since the local currency is in high demand mainly due to election season.

Just a month back, the open market had witnessed the birth of a black market where US dollar was being exchanged at more than Rs100. However, dollar started falling with the departure of the elected government and with the beginning of election process in the country.

Currency dealers said that prior to the beginning of election process, dollars were bought from the open market on a large scale and were saved in local banks, and due to this reason, holdings of local banks crossed an all-time high.

According to the State Bank, dollar holdings of the local banks crossed $5bn mark which is an all-time high. Reserves of the State Bank slipped to $7.2bn in the last week of March.

“We have seen a very high demand for dollar before the departure of the previous government and now the local currency is in high demand which significantly slashed the dollar demand and prices in the open market,” said Malik Bostan, Chairman, Exchange Companies Association of Pakistan.

The currency dealers said that spending on elections requires local currency while political parties and politicians like to keep their savings in US dollars. Now dollar is being sold in the market for cash in local currency.

“I believe the demand for local currency will further increase in the coming days , and it will further reduce dollar price and it may fall to Rs96 per dollar,” said Bostan.

On Tuesday, the dollar was traded at Rs98.75 in the open market.

However, other currency dealers said that the local currency has found other attractions in the country.

“The local currency has found sugar, cotton and stocks more attractive, compared to dollar,” said Anwar Jamal, a currency dealer in the open market.

He said both prices of cotton and sugar were going higher which attracted investors as their yields are also higher than the US dollar. He said local currency is also in demand for equity market.

He said that property witnessed a rise in selected areas of Karachi during a couple of months which has again increased demand for local currency.

There are still more than 37 days for elections, and hopes are high for a better future, which is giving confidence to investors for investing in sugar, cotton, property and other sectors, said Mr Anwar.

The inter-bank market witnessed a slight recovery in the exchange rate, but most of the time dollar demand remained high since repayments to the IMF.