Rupee strengthens below Rs300 to US dollar

Hits three-week high at Rs299.89/$ in the interbank market

ISLAMABAD:

The Pakistani currency has made significant gains against the US dollar, recovering to a three-week high below Rs300 at Rs299.89/$ in the interbank market. This marks the fifth consecutive working day of a strong upward rally, with the rupee gaining 0.42% or Rs1.27 against the greenback, according to State Bank of Pakistan (SBP) data.

Market analysts had anticipated this recovery, as demand for the rupee increased while supplies of foreign currency also rose. Market reports suggest that supplies of foreign currencies exceeded demand, with exporters and banks converting foreign currencies into the strengthening local currency. The outlook for the rupee stabilising in the range of Rs295-300/$ under the current cycle of strength has further fuelled this trend.

Another factor contributing to the rupee’s rebound is the increasing inflow of workers’ remittances sent by overseas Pakistanis. Recent efforts to curb the black currency market in the country have also played a role in stemming the decline of the currency and supporting its partial recovery.

Read Rupee slide, inflation pull PSX deep into red

Over the past five days, the Pakistani rupee has cumulatively strengthened by 2.40% or Rs7.21 in the interbank market. This follows a period in which it had depreciated by slightly over 6% or Rs18.50 in the first three weeks of the caretaker government’s tenure to an all-time low of Rs307.10/$ on September 5. The rupee’s decline during that period was largely attributed to foreign currency smuggling, particularly to Afghanistan.

The government’s crackdown on currency smugglers and its actions against exchange companies involved in illicit activities have helped stabilise the currency to some extent.

In the open market, the domestic currency closed unchanged at Rs300/$ on a day-to-day basis, ending a six-day winning streak, according to the Exchange Companies Association of Pakistan (ECAP). Over the previous six days, the rupee had regained 9.33% or Rs28 in the retail market, according to ECAP.

Some dealers had individually reported that dollars had disappeared from the market and people were willing to pay around Rs340 for one dollar until early last week.

Gold up again

The recovery of the rupee and its stability in the foreign exchange market have had positive effects on the local gold market. Gold prices in Pakistan surged by Rs5,600 to reach Rs215,000 per tola (11.66 grams) on Tuesday, ending a week-long losing streak. This recovery occurred despite a $15 decrease in global gold prices to $1,911 per ounce (31.10 grams). The recent depreciation of the rupee had contributed to a decline in local gold prices, which had lost nearly 13% or Rs30,400 from their near all-time high of Rs239,800 in the second-to-last week.

Published in The Express Tribune, September 13^th, 2023.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.