Rupee recovery changes market sentiment.

KARACHI -- The rupee continued to appreciate against the US dollar and recovered another Rs1.75 on Wednesday in the interbank market.

The dollar fell by Rs9 in the open market from its peak of Rs215 on June 22 to Rs206 on Wednesday.

Currency dealers in the interbank market said demand has reduced while supply has increased during the last 10 days. However, the sustainability of this appreciation is still uncertain. The dollar's closing price in the interbank market was Rs205.12.

During the last seven sessions, the dollar depreciated by Rs6.81, which changed market sentiment while buyers and sellers also changed their approach.

'The market sentiment has changed with the inflow of $2.3 billion from China as the dollar lost Rs4.70 within a single session; this was the record recovery of the rupee in one day,' said Zafar Paracha, the secretary general of the Exchange Companies AssoA!ciation of Pakistan (ECAP).

He said one of the main reasons for the very high demand for dollars was fake Letters of Credit (LCs). Importers, with the connivance of banks, opened four or more LCs and dollars were sent out without imports.

'Using just one LC while opening four LCs is enough to understand that money laundering has been committed,' said Mr Paracha.

Currency dealers in the banking market said the dollars were sufficiently available now to meet the demand. Since the trade deficit was reduced this month, the demand has declined.

Another reason for rupee appreciation was the selling of dollars by exporters who used to hold for as long as possible to benefit from rupee...