The dollar hit a high of 88.30 against cash

- Impact of demonetisation, TCS and travel season jolted the foreign exchange market

- There is a rush to buy dollars, pounds and dirhams through hawala

Ahmedabad, 23 May 2023, Tuesday

The Reserve Bank of India announced the withdrawal of Rs 2,000 notes on Friday. The announcement led to a surge in demand for dollars, euros and dirhams in the private, cash-traded foreign exchange market. Tourists are now going out of the country due to vacation and since the central government has announced 20 percent tax collected at source on payments in foreign currency from July 1, even then there was a huge demand for cash dollars, the new factor is that the price of the incoming dollar has risen to 88.30. Market sources say.

Even when demonetisation came in 2016, some people lined up the scrapped Rs 500 and Rs 1000 notes they had on hand to buy gold and US dollars. This time the volume of Rs 2,000 currency notes is less than that time but those who have them are rich and most of them are unaccounted for and are moving towards dollars and gold.

Market sources said that the dollar demand was high not only because of the new demonetisation but also because of other factors. Under normal circumstances, there is a premium of around Rs.1.50 to 2.50 in the cash market against the foreign currency received through banking, but now the premium has increased due to three reasons. However, sources say that the market in Ahmedabad and Gujarat is in short supply of dollars as many licenses of the Full Flagged Money Changer (FFMC) category have been cancelled. As per Reserve Bank list there are about 146 FFMC licensed forex dealers under Ahmedabad Regional Office (Gujarat, Diu, Daman). However, market sources said that the Reserve Bank has canceled as many as 22 licenses in the last three months for non-compliance with various regulations.

In Ahmedabad on Monday, the price of the dollar in cash was 88.30 while the price of the dirham required for those traveling to Dubai was 24.20. In addition, the pound was at 109, the euro at 96.20 and the Australian dollar at 56. According to the reference rate of the Reserve Bank, the price of the dollar is 82.80, the pound is 103 and the euro is 89.60.

Buying dollars without people's knowledge on Visa

Sources in the market said that once the visa is approved, Forex dealers and travel agents are buying dollars and pounds up to a limit of Rs.50,000 (i.e. no need for PAN card or other documents) based on the paper on hand. They sell these dollars or other currencies to other people at high prices and earn their commission. As less travel agents are providing dollar supply in the market due to cancellation of Lions, prices are seen high as supply falls against demand.