Amid a sharp decline in the value of the local currency, the State Bank of Pakistan (SBP) blasted banks for engaging in speculative trade in the foreign exchange market, and warned them to stay away from this activity, as it pushed to curb speculation and prevent the rupee’s free fall, sources told The News Thursday, reports Geo.
The SBP management held a meeting with the heads of 10-12 major banks after reports that speculative trading by some bank’s treasury officials influenced the exchange rate, manipulating the market for the sake of personal profits.
“The central bank has been concerned about reports that said some banks helped cause speculation and uncertainty in the rupee,” one source told the publication.
“The SBP has warned banks against such type of practices, otherwise strong action will be taken against them,” sources added.
The rupee has been under pressure and it fell to an all-time low of 175.73 against the US dollar on November 12.
In times of currency depreciation, traders’ guidance triggers panic buying in the market. They convince importers to buy more in a short period to make their payments so this unnecessary demand creates a shortage of dollars in the market. At the same time, they advise exporters to not sell dollars and hoard it in anticipation of further depreciation, which weakens the greenback supplies.
