KARACHI - Seeing unabated erosion in the value of rupee against the US dollar, the State Bank of Pakistan is likely to freeze the dollar-rupee exchange parity at Rs 75, sources told The Nation on Thursday. Sources said that the high ups of the SBP are working on a mechanism to fix the dollar-rupee exchange rate and a notification in this regard is expected to be issued soon after Eid holidays. The price difference between the two trading currencies is anticipated to narrow, reaching a certain level of parity as the central bank is ready to put barrier or verbal cap on interbank and open market dealings by fixing rate of Rs 75 for the trading of both currencies in local forex market, sources said. It may be noted here that during the past couple of months the value of dollar had edged up by 15 rupees against Pak-rupee that showed the gravity of the vulnerability of the local currency against the US currency. The recessionary tendency being witnessed in the capital market attributed to global credit crisis and the complications on financing of external current account deficit, speculative positions in the domestic foreign exchange market and import demands are putting enormous pressure on the exchange rate mechanism. The domestic currency market is likely to gain exchange rate momentum against the US dollar including other major foreign currencies as the central bank is expected to fix dollar-rupee parity by 75 rupees within 1-2 weeks. The SBP may announce this directive through a notification by the start of next month to be followed by scheduled banks and authorized exchange companies Sources said that, this "extra ordinary" development to be taken place by the SBP for the upcoming days is on the cards. Earlier, currency analysts were projecting that there was a bubble in the capital market which could finally burst any time and the dollar might be reaching at Rs 80 at any upcoming session of forex trading. Analysts do term "uncertainty" being observed in the local capital market is very much accompanied by so-called speculative behaviour rather than liquidity mechanism. Despite facing weaknesses in the supply side due to slow growth in financial inflows, absence of any consolidated economic strategy coupled with lack of viable financial agenda to tackle the prevalent economic issues is making our capital markets are more volatile. It is important to note here that pressures on foreign exchange reserves strained exchange markets as after experiencing a high degree of exchange rate stability for almost five years, with the growing pressure on foreign exchange reserves, rupee-dollar parity depreciated sharply by Rs 15 in FY08. However, depreciation in the real effective exchange rate was only 2.4 percent due to high domestic inflation relative to inflation in the trading partner countries. The exchange rate dipped to low of Rs over 78 per US$ in FY09 compared to an average of Rs63 per US$ during FY08. In order to rescue the national currency from free falling, the SBP had introduced a number of foreign exchange regulatory laws according to SBP directives; it had suspended forward booking against all types of imports, providing foreign exchange to the dealers for the import of all categories of Furnace oil, imposition of 100-percent L/C margin condition on the import of non-essential items etc. SBP stopped providing forex to exchange companies to meet oil imports. Opting exchange rate adjustments towards falling rupee against dollars, the central bank had increased discount rates further by 100 bps to 13 percent effective from July 30, 2008 By September 20, 2008, the dollar-rupee exchange rate had set a new record and edged up to over 78 rupees falling, rupee to all-time record-breaking low against the US currency in the economic history of Pakistan amid speculations that the rupee would shed more value against the US currency because of domestic negative economic developments and global financial crisis. The SBP reported on Thursday that as on 20th September, 2008, the foreign exchange reserves of the country declined to 8.823 billion dollars, depicting depleting status of exchange reserves.   The manipulators are keeping away both local and foreign investors from the money market to bring financial inflows because they are portraying instable outlook for the markets, said currency analyst. The weakening trend of our exchange rate regime is much influenced by the volatile-like situation in the capital market which is being persisted on the back of flight of capital, from the local markets for the last many months.