One shady side of rupee appreciation

If you go to a currency dealer to buy dollars, chances are that you won get the rate that you are expecting; at least at many money changers in the capital city. In the open market rates last week, rupee hovered between 98 and 100. However, higher rates charged by currency dealers gave rise to what could be coagulating the shady side of rupee appreciation.
We never got dollars at a lower rate (Read: Rs98), discloses a currency dealer at a local exchange company, selling dollar at Rs103. There could be many reasons to it.
One likely possibility is the restricted supply of dollars. Recall that during last week, the rupee appreciated, dipped and appreciated again this week. Rumour has it that the central bank mopped up millions of dollars, which means less dollars available in the interbank and open market, and thus increase in demand due to shortage so created.
Exchange companies are bound to trade dollar with a difference of one percent from the interbank rate. Talking to BR Research, Haji Haroon, a currency dealer, agrees with some supply side issues that existed till late Friday, leading to higher rates. However, he clarifies that after the assurance of adequate dollar supply as per the demand of the exchange companies by State Bank of Pakistan (SBP), the open market rates were restored.
What else could give rise to an anomaly between the open market rates and the rates actually charged by the currency dealers? Some dealers point towards a lag in the exact translation of rates by all exchange companies.
While the explanation offered by Haji Haroon might just have to do with market sophistication: some money changers located along Blue Area, a major business district of Islamabad, might be charging a premium over the prevailing open market rates in cases where buyers and sellers come after general working hours. This is especially true for transactions beyond $50,000-the permissible threshold where the money changers might manipulate rates.
Lower interbank rates relative to open market is another instance that has transpired some dubiety over the appreciation of local currency, but Haroon dispels such concerns saying that its somewhat a frequent phenomenon, and the value is soon adjusted to one percent difference.
The stakeholders like money exchangers and importers have welcomed this stagy rupee appreciation. For many of them, dollar would stabalise at around Rs98-99 for the rest of the fiscal year. Some of the other concerns like the re-emergence of rupee depreciation can be put on hold as the market is sanguine about the rising foreign reserves, thanks to optimistic views on telecom spectrum auction, oil credit facility by Saudi Arabia, Coalition Support Fund and the IMF upcoming tranche.
On the flip side, the up and down in currency market can also transcribe into speculation where the government keeps buying most of the dollars to keep it afloat at around current levels on the request of the exporters.