Action against currency speculation: SBP reduces two banks' NOP, warns others

The State Bank of Pakistan (SBP) has taken action against two banks by reducing Net Open Position (NOP) and warning other banks not to take unnecessary position against the rupee, as a result the rupee strengthened by 70 paisa against dollar in interbank market on Tuesday. The dollar rate declined to Rs 90.10 in interbank market from Rs 90.80.
Although the dollar posted huge decline in the interbank market because of SBP move, the demand for dollars remained unabated due to growing political uncertainty in Islamabad. As a result, the rupee value against dollar stood at 91.20 in the open market.
According to sources, the Nostro limits of NIB Bank and Samba Bank were reduced by SBP on Tuesday. Officials of the State bank called treasurers of all major banks to inform them of possible SBP action in case the central bank sees that banks are speculating against the rupee in creating demand for dollars without backing of trade deals.
The SBP action was meant to pressurise the banks to bring back excess dollars held abroad to undertake commitments given to the traders against import letters of credit (LCs), they added. Banks are allowed to hold dollars worth Rs 350 billion in Nostro accounts held abroad. Individual bank limits are worked out by SBP in accordance with bank capital and trade related business.
According to open market sources, politicians and officials who have money to hide are aggressively persuading the Hundi/ Hawala dealers for transfers of funds abroad, especially to Dubai. Real estate prices have also rebounded as large numbers of people with tax evaded money are seeking to park their wealth in real estate.
According to a real estate broker, the difference between the registered price of property is a fraction of the transaction price. A thousand yards plot in Phase 8 of DHA Karachi is registered on value of Rs 1.6 million, whereas the actual transaction price is set to be Rs 25 million, said a broker. The money market appreciated the SBP's move on NOP, however, they felt it will be temporary and Pak rupee will remain under pressure as long as political uncertainty persists in Islamabad.