KARACHI: The continued panic-buying of dollars on Monday forced the rupee to hit record low at Rs90.60 against the US dollar in the open market.

Currency dealers said the exchange rate in the inter-bank market was, however, maintained at Rs87.62 to 87.65 for the last three sessions mainly due to the State Bank’s frequent interventions with massive dollar pumping.

“If the State Bank stops intervention in the inter-bank market the dollar will sharply climb against the rupee,” said Atif Ahmed, a currency dealer.

The panic was more visible in the open market where the US currency was traded at Rs90.60 while the demand was till high.

“The State Bank has assured that it will provide dollars as much as required by the open market from Tuesday (today),” said Malik Bostan, Chairman Exchange Companies of Pakistan.

The open market is short of dollars since the demand has gone up by 60 to 70 per cent from $10 million to $15 to $20 million per day.

“With the supply of dollars from State Bank we would be able to bring back stability in the exchange rate,” said Bostan. He believes that the dollar could be traded at Rs89 to Rs89.50 after State Bank’s supply.

He said the State Bank also agreed to provide dollars through National Exchange, owned by NBP. This was agreed on request of exchange companies as they want to avoid complicated procedure for getting dollars directly from the State Bank.

The currency experts said the panic was mainly due to worsening relations with the United States which indicates that Pakistan may witness falling inflows of dollars in future.

However, some reasons like significant decline of euro and British pound against US dollar, appreciation of greenback against regional currencies like Indian rupee and Singapore dollar, failed talks with IMF for resumption of $11.3bn Standby Arrangement and profit-making in gold were also considered as strong reasons for hike in dollar price.

One of the most significant impact emerged from the dollar panic buying was the widening difference of dollar rates in open and inter-bank markets.

The premium in the open market reached Rs3 per dollar. This huge premium helped the Hundi system to resurface.

Currency analysts expressed doubt that it (the difference) may hurt the inflows of remittances through banking channel that could hit hard the country which succeeded to maintain a current account surplus in the fiscal 2010-11 after seven years of deficits.

Pakistan received $11.2 billion last year as remittances.

When asked, a currency dealer said this was the best time to sell the dollars for such high premium. He believes that it may not go further high.