Rupee breaks losing streak, rises Rs3.5

Clarity on political front, policy rate hike aid currency’s recovery

KARACHI:

Pakistani rupee broke a prolonged downward streak and made a sharp recovery in the inter-bank market on Friday as it gained Rs3.5 against the US dollar to close at Rs184.68 following the emergence of some political clarity in the country.

According to the State Bank of Pakistan (SBP), the rupee had closed at Rs188.18 against the greenback on Thursday.

A report of Arif Habib Limited stated that the rupee appreciated 1.89% day-on-day, but it was still down 14.7% since the beginning of current fiscal year on July 1, 2021.

Speaking to The Express Tribune, Arif Habib Limited Head of Research Tahir Abbas said that the Supreme Court’s decision that nullified the dissolution of assembly was the main driver behind the rupee appreciation.

“Foreign exchange market participants now foresee political stability, hence the rupee regained substantial ground,” he said, adding that the local currency would recover further over the next few days.

Arif Habib Commodities CEO and Managing Director Ahsan Mehanti stated that the easing of political uncertainty in the country aided the rupee’s rebound against the greenback.

“The foreign exchange market took Supreme Court’s decision positively and speculation was low,” he said.

Moreover, the State Bank increased the policy rate by 250 basis points to 12.25% in a sudden move, which facilitated the recovery of the rupee.

Following the central bank’s move, investors opted to divert their money to the fixed income market and even foreign investors were switching to fixed income assets from the foreign exchange market, he said.

Alpha Beta Core CEO Khurram Schehzad stated that the latest monetary policy announcement was a major factor that lifted the rupee against the US dollar.

“Moreover, there is political clarity. The Supreme Court has issued the verdict with guidelines and the political battle looks one sided now, therefore the easing of uncertainty helped the rupee to recover,” he said. “Although this relief may prove to be temporary, still it is there.”

Gold price recedes

The price of gold fell Rs2,000 to Rs132,000 per tola from an all-time high of Rs134,000 recorded a day earlier.

Speaking to The Express Tribune, AA Gold Commodities CEO Adnan Agar stated that the price of yellow metal was nearly flat in the international market, however, the rupee appreciation brought its price down in the domestic market. Pakistan is a net importer of gold.

“The sudden hike in interest rate by the State Bank also helped gold to shed some value,” he said. “Moreover, there is clarity about the no-confidence motion in the market, so investor sentiment is strong.”

Published in The Express Tribune, April 9^th, 2022.

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