KARACHI: The rupee depreciated by roughly 1% against the dollar on Wednesday as a result of the elimination of the unofficial dollar restriction.

The rupee fell 2.25 or 0.92% to settle at 243 versus the dollar, according to a statement from the Exchange Companies Association of Pakistan (ECPA), down from a range of 237.75-240 at Tuesday's closing.

The dollar lost 0.58 or 0.21% of its value in the interbank market, according to the State Bank of Pakistan (SBP), and closed at 230.89 as opposed to 230.40 on Tuesday.

The International Monetary Fund (IMF) should be pleased with the transition to a market-based currency rate because that is one of the requirements the global lender has set before it agrees to open a blocked bailout programme .

The IMF had advised against Finance Minister Ishaq Dar's initiatives to safeguard the rupee, including currency market intervention.

The government has only enough foreign exchange reserves to cover three weeks' worth of imports, and it is straining to pay its external financial obligations as it battles the greatest inflation in decades.

In the interest of the nation, the ECAP announced late on Tuesday that it was removing the currency cap.

Before the rupee cap was lifted, markets looked at three separate rates to gauge the worth of the currency: the official rate set by the state bank, the rate determined by foreign exchange businesses, and the black market rate.

According to ECAP President Malik Bostan, the central bank promised at a conference that commercial banks will be urged to instruct exchange companies to provide dollars within a week.

"We have a shortage right now. There are no actual dollars here "said Bostan. "Nobody is selling dollars. All they do is buy."

He claimed that lifting the cap would reduce black market trade, however closing the deficit would take time.

"The price on the illicit market is still stuck at 260 and 270. Exchange company decisions haven't had any real effects "said Fahad Rauf, Ismail Iqbal Securities' head of research.