KARACHI: Pakistan’s national currency posted historic gains against the United State dollar in the open market on Thursday, following the central bank’s decision to allow banks to buy dollars from the interbank market for credit and debit card payment settlements, currency dealers said.

The rupee was trading at Rs290 in the open market during the afternoon trading session as compared to Rs315 in the previous day’s trading, showing an appreciation of 8 percent, according to dealers. 

“The rupee has appreciated more than Rs25 in the open market and this has happened for the first time in the history of Pakistan,” Malik Bostan, chairman of the Exchange Companies Association of Pakistan (ECAP), told Arab News. 

The currency appreciated in the open market after the central bank on Wednesday allowed authorized dealers, that is banks, to “purchase dollar from the interbank for settlement of the card based cross border transactions with IPS (Instant Payment System),” a notification said.

Prior to the State Bank notification, commercial banks were buying around $15-20 million from the free market per day, putting an excessive burden on it, the key reason for the widening gap between the interbank and open market, according to Bostan. 

“The banks were buying dollars from the open market at Rs315 but they were selling to their customers for the settlement at Rs325,” Bostan said, adding that banks had been buying from the open market but selling to their credit card holders at higher rates which excessively burdened the free market.

“They, Finance Minister Ishaq Dar and Central bank, took the timely decision and allowed them to purchase from the interbank market instead of the exchange companies,” he added.

Bostan’s claims could not be independently verified.

The ECAP chief predicted that the central bank’s decision would lead to further appreciation of the rupee in the open market, to reach close to the interbank rate.

The rupee in the interbank was trading between Rs290 and Rs300 at the end of trading session on Thursday, according to Bostan.

Pakistani analysts said the central bank’s move had eased the pressure on the open market and would also narrow the gap between the open and interbank markets in line with the International Monetary Fund’s conditions.

“The demand for credit and debit card settlement is around $2 billion to $2.5 billion per annum and the central bank’s decision has eased off the pressure from the open market,” Tahir Abbas, Head of the research at Arif Habib Limited, said. “The IMF also wanted to reduce the gap between the exchange rates prevailing in the interbank and open markets.” 

The rupee in the interbank market closed at Rs285.47 against the greenback on Wednesday.