Rupee hits seven-week high at 138.78

Inflows from UAE and Saudi Arabia have helped avert panic at currency markets

KARACHI: Pakistani currency has recovered to a seven-week high at Rs138.78 against the US dollar in inter-bank market on Friday, according to the State Bank of Pakistan, after the country successfully mitigated the risk of default following receipt of $2 billion from friendly countries.

Simultaneously, the rupee revived to a four-week high at retail market to 139 against the greenback on Saturday, according to a forex website.

“The $2 billion inflows from the UAE and Saudi Arabia (on Thursday and Friday) has partially eased the panic at currency markets,” said a banker on condition of anonymity.



The receipts have surely improved the country’s foreign currency reserves from less than two-month import cover prior to the inflows. “The improvement is reflecting in currency markets,” he said.

With the latest inflows, the two Gulf countries deposited a total of $4 billion in the past three months under financial assistance packages totalling $6 billion to help stabilise Pakistan’s foreign currency reserves which, as of last week, dropped to a 57-month low of $6.63 billion.

Besides, speculation about receiving a similar assistance package from China also echoed in the market.

The inflows have eliminated chances of further devaluation in the rupee in the short-run, said the official.



Although the recovery in rupee was nominal, just Rs0.15 in the past two days (Thursday and Friday), in the inter-bank, the improvement aided the domestic currency to recover close to its worth on December 6, 2018, of Rs138.74.

Since December 2017, authorities let the rupee depreciate by a massive 32% in the inter-bank market.

The rupee recovered Rs0.55 in the last two days (Friday and Saturday) to a four-week high of Rs139.05 in retail.

“The rupee may recover by another Rs2-2.5 (to the greenback) after the remaining $2 billion are received from UAE in the near future,” said Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha.

Pakistan Forex Association President Malik Bostan said, “The $2 billion inflows (under soft loan programs) have facilitated Pakistan in averting default on international payments.”

Besides, the announcement to award on-arrival visa to tourists from 50 countries and business visa from 96 countries also helped ease pressure on the rupee. “Tourism attracts foreign currencies, which is positive in case of rupee,” he said.

He said the pro-business mini-budget, which was highly focused on boosting exports and discouraging imports, has also helped the rupee gain against the US dollar and other major global currencies, he said.

Crackdown against illegal hundi and hawala operators and increase in jail term for culprits would impact the rupee positively and help strengthen documented economy, he said

“Retail market would continue to following inter-bank market,” he said.

They dismissed chances for further rupee devaluation in the short-run, except in case Pakistan approached the International Monetary Fund (IMF) to receive a bailout package, chances for which are substantially high.

Published in The Express Tribune, January 27^th, 2019.

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