KABUL: Afghanistan's currency hit 100 to the US dollar Tuesday, losing five percent of its value in one day in a panic triggered by fears that one of the country's biggest banks could collapse, traders said.

Afghanistan has been hit by an enormous shortage of dollars since the Taliban marched into Kabul and seized power on August 15, as international donors suspended billions in aid provided annually to the previous regime.

Since the Taliban takeover, the US has frozen around 10 billion dollars in reserves that Afghanistan's central bank had parked in the US Federal Reserve.

The crisis looked set to deepen overnight and this morning when news circulated that Maiwand Bank -- among the country's five biggest lenders -- had collapsed.

"That was false," said Haji Sher Shah Ahmadzai, who heads the dispute resolution committee at Kabul's Money Exchange Commission.

But "trust has been eroded," he said, as Maiwand has in recent weeks failed to return funds owed to the commission, which has some eight million dollars deposited in the bank, Ahmadzai said.

One financially insolvent trader among the hundreds at Kabul's open air exchange held his head in his hands, repeatedly crying out: "I have drowned!"

The Afghani stood at 104.5 to the greenback in late Tuesday trade, compared to around 80 in early August.

One trader said that the market is being hit by fears of a much wider collapse of the country's financial system.

"There are rumours about the collapse of all Afghanistan's banks," said Bilal Khan as he counted batches of Afghanis.

"There is no money in the banks. The banks are refusing to pay your own money to you."

Khan also cited a dawning realisation in the market that the Taliban will not be recognised by the international community any time soon.

Traders had initially expected that "the new government would be recognised," he said.

But consequent disappointment "is causing heavy devaluation of the Afghani against the dollar, Pakistani rupee and the Euro".

The Taliban last week announced a ban on using foreign currencies in Afghanistan.

Taliban ban use of foreign currency in Afghanistan

But the rules are not being enforced, according to traders.

The country's cash crunch has fed into an economic collapse that has left it facing a deepening humanitarian crisis.

More than half of Afghanistan's 38 million people face "acute" food shortages, according to the United Nations, with the impending winter forcing millions to choose between migration and starvation.

The new government is pressing for the US to release the frozen central bank reserves.