Rupee recovers 4.5% to Rs273 against US dollar

Pakistani currency gained value after the SBP announced an increase in foreign exchange reserves

KARACHI:

The Pakistani currency made a sharp recovery of 4.5%, or over Rs12, to Rs273 against the US dollar in the interbank market at around noon on Friday.

The rupee partially gained ground against the greenback after yesterday's historic drop of 6.7%, or Rs19, to an all-time low of Rs285 per US dollar.

The latest recovery follows three developments over the past 24 hours.

Firstly, Finance Minister Ishaq Dar announced that the government expects to achieve the much-delayed staff-level agreement with the International Monetary Fund (IMF) next week. The programme is a lifeline for economic survival and averting imminent default.

Secondly, the rupee gained value after the central bank jacked up its key policy rate by 300 basis points to a 26-year high of 20% on Thursday.

The hike in the policy rate indirectly supports the rupee against the greenback, as it makes banking credit expensive, raises the cost of doing business and discourages imports.

Read SBP jacks up key rate as rupee nosedives

Thirdly, the State Bank of Pakistan (SBP) officially announced that foreign exchange reserves have continued to grow for the third consecutive week on Thursday.

The growth in foreign exchange reserves directly defends the local currency against the foreign dollar.

The country's reserves improved to an almost six-week high of $3.8 billion after China's $700 million loan, the SBP reported on Thursday.

Earlier, the domestic currency had plunged to a record low at Rs285 per dollar due to IMF concerns that the government was still controlling the rupee and the black currency market was reorganizing again.

Alpha Beta Core CEO Khurram Schehzad said in a brief comment that "this volatility creates more uncertainty and panic in the minds of lenders, investors, importers and exporters, than anything else".