Rupee ticks up, aided by drop in dollar demand

Touches one-week high at Rs284.96 against greenback

KARACHI:

Pakistani currency maintained its uptrend for the second consecutive working day on Monday as it moved up by 0.04%, or Rs0.12, to a one-week high at Rs284.96 against the US dollar in the inter-bank market.

According to the State Bank of Pakistan’s (SBP) data, the currency had closed at Rs285.08 against the greenback on Friday after it made the largest recovery of Rs13.85 (or 4.85%) in a day in the wake of easing political tensions. In terms of percentage, Friday’s recovery was the second largest.

Market talk suggested that the rupee extended gains, aided by the drop in demand for foreign currency following a big import payment, which was arranged between May 9 and 11, the days of high drama in the country’s political scene.

The huge dollar payment for imports had reportedly been arranged by the oil refineries. The share of oil imports remains around one-fourth in the total import bill for a month.

Earlier, the rupee nosedived by a cumulative 4.71%, or Rs14.09, in two days (May 10-11) to a record low at Rs298.93/$ on the back of worsening political turmoil and law and order situation following the arrest of former prime minister Imran Khan. His release on May 12 on court orders helped the rupee to recoup losses.

Experts recalled that the rupee had stabilised around Rs285/$ before the political upheaval of last week as dollar supply surpassed its demand in the domestic market. They pointed out that increased dollar inflows helped the central bank to repay debt of $900 million to the domestic commercial banks in March.

Besides, the inflow of workers’ remittances beat trade deficit in April, sparking hopes that Pakistan would continue to see its current account in surplus for the second straight month.

In March, the current account switched from deficit to surplus of $636 million but it came at the cost of economic growth as the government enforced administrative control over imports.

As part of import control measures, the government partially banned imports to save its low forex reserves and stave off the risk of default.

Published in The Express Tribune, May 16^th, 2023.

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