ISLAMABAD: The rupee depreciated against the dollar on Wednesday after the Exchange Companies Association of Pakistan (Ecap) removed an unofficial cap on the exchange rate.

According to a notice issued by Ecap Chairman Malik Bostan’s office, the USD was being traded at Rs243 in the open market at 11am, falling 0.93 percent from yesterday’s close of 240.75. It was being traded at Rs231.5 in the interbank market at the same time.

Separately, Ecap General Secretary Zafar Paracha said a committee of exchange companies would decide the USD-PKR rate in the open market in a meeting later today.

He said talks between State Bank of Pakistan (SBP) Deputy Governor Inayat Hussain and Ecap representatives were successful. “The State Bank accepted all our demands including removing the cap.”

Paracha said the SBP further directed commercial banks to supply dollars to exchange companies. He vowed to bring the USD-PKR exchange rate in the open market to the ‘actual’ rate so the grey market could be abolished.

The exchange rate has been primarily hit hard by a steep decline in the central bank’s foreign exchange reserves, which have shrunk to $4.6 billion. Currency experts say the rupee has been falling “despite being managed” by the SBP.

Amid a shortage of dollars, the gap between its rates in the interbank and open markets has significantly widened, drastically hurting the economy and diverting remittances from the legal banking channel to the grey market.

Some experts have hinted that the shortage of dollars could cause rationing of petrol and diesel in the next two to three months, ultimately hitting trade and industry and even the agricultural sector, which needs diesel during the harvesting season.

On Tuesday, Ecap Chairman Malik Bostan issued a statement after a meeting of the association, saying that the decision to cap the dollar rate had proved to be “negative”.

“Instead of falling, the dollar rate increased, resulting in the unavailability of the greenback in the market which also gave birth to the grey market.”

He further lamented that citizens who wished to buy dollars for travelling or funding their education and health expenses were not able to do so and had to turn to the grey market.