Market manipulation: SBP starts probe against exchange companies

[Naveed Yaseen]

RIZWAN BHATTI
KARACHI (October 21 2008): The State Bank of Pakistan on Monday initiated investigation against exchange companies to check whether they are manipulating the currency market, while instructing them to minimise the value difference of dollar between interbank and open market rates, market sources said.

They said that the decreasing value of rupee had made the central bank to ascertain the reasons and fundamentals of rupee depreciation in the country, and set up investigation teams to overcome the present crisis. These teams will visit exchange companies for investigation and concluding their reports. The SBP has also asked some leading exchange companies to submit details of dollar trading that took place during last one month.

Sources said that SBP has provided some 20-25 million dollars at a rate of Rs 80 to exchange companies aimed to stabilise rupee value during last ten days. However, the open market responded negatively, despite the central bank's intervention, as the dollar kept on increasing its value to the level of Rs 87 in the open currency market.

"The SBP has received complaints that some exchange companies have acquired dollars from the central bank at notional rate of Rs 80 and sold them at high rates in the open market specially in Peshawar market, where the demand of greenback was also high due to its smuggling into Afghanistan," sources said.

After noticing the whole scenario, the central bank asked the leading 'A' category exchange companies to submit details of dollar transactions, particularly dollars acquired from SBP in the recent crisis.

Market sources said that earlier difference between dollar buying and selling rate was at 30-50 paisa in the open currency market, which has now increased to Rs 1-2 during the last few weeks and exchange companies are fully enjoying the whole game. In addition, the difference in dollar rate of interbank and open currency market also enhanced to Rs 2.80 from Rs 0.50-0.80 during the last one month.

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