PKR vs dollar: Rupee recovers to 298 against greenback in open market

• Campaign came after dealers requested COAS to curb dollar rates.
• Rupee recovers to below 300 per dollar in open market.
• Govt issued strict orders against illegal money changers, mafias.

After the authorities launched a crackdown to curb black market trade in the country's major cities, the Pakistani rupee continued to gain against the US dollar, strengthened by another three in the open market on Thursday. 

According to the Exchange Companies Association of Pakistan (ECAP), the rupee recovered to 298 against greenback after gaining 3 in the open market at the close of the day.

On the other hand, the State Bank of Pakistan stated that the rupee appreciated by 0.29% to close at 297.96.

Raids on black market operators began earlier this month after the rupee plunged to a record low of Rs333.7 on September 5.

The army-backed campaign came after dealers requested Chief of Army Staff (COAS) Gen Asim Munir to take action to curb the rocketing dollar.

As a result of the campaign, the Pakistani currency recovered to below 300 per dollar in the open market earlier this week and tens of millions of dollars have poured back into the country's interbank and open markets, dealers say.

At a meeting last week with officials, including heads of law enforcement and security agencies, ECAP Chairman Malik Bostan and colleagues said the matter needed to be urgently escalated to General Munir.

"The army chief took notice, and the restoration of supply in the open market is credited to him," Bostan told Reuters.

"A task force was made that is now cracking down on the illegal market."

A security official, who requested anonymity, hailed the success of the crackdown.

"The reason is the initiation and enforcement of administrative measures against hoarders, black marketeers and smugglers of dollars," the official told Reuters on condition of anonymity.  "The government has issued strict orders against unauthorised money changers and other mafias."

For the past week, the hundreds of currency shops in the usually bustling lanes of Peshawar's Chowk Yadgar bazaar have been closed.

"A few days ago, some people, believed to be law enforcement officials, came here and arrested senior members of this market and put them in their vehicles with tinted glasses and drove them away to an unknown location," said Haji Luqman Khan, an aged trader, told Reuters.

Controlling the open market rate is critical for Pakistan following the $3 billion bailout from the International Monetary Fund (IMF) that was agreed in July to help avert a sovereign default.

An IMF demand that the difference between the interbank and open market does not exceed 1.25% will be a key part of discussions set to begin later this month, before the release of the next tranche of the bailout.

Giving an indication of the scale of the problem posed by the parallel markets, Sheikh Allauddin, the president ECAP, reckoned annual transactions in the black market were roughly $5 billion, compared to $7 billion in the regulated open market.

— With additional input from Reuters.