Rupee recovers for sixth day in a row
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Pakistani currency maintained its winning streak for the sixth consecutive working day on Wednesday as an increase in the flow of US dollars helped the rupee reach over three-week high at Rs298.82 against the greenback.
The State Bank of Pakistan (SBP) reported that the rupee gained 0.36%, or Rs1.07, at Rs298.82/$. With the fresh appreciation, the currency has made cumulative gains of 2.77%, or Rs8.28, in six days.
Praising the government’s crackdown on currency smugglers on the directives of Army Chief General Asim Munir, Exchange Companies Association of Pakistan President Malik Bostan predicted that the rupee may gradually recover to Rs250/$ if black markets were eliminated permanently.
In first phase, he believes, the currency may rise to Rs290/$ under the current appreciation cycle.
Bostan pointed out that since the launch of the crackdown, the supply of dollars to foreign exchange companies had improved and “we are selling around $15 million in the inter-bank market every day compared to $5-7 million last year.”
In the open market, however, the currency lost 0.33% of its value, or Rs1, to Rs301/$, suggesting that the recent uptrend had come to an end.
In retail trade, the currency regained 9.33%, or Rs28, in the prior five working days at Rs300/$ by Monday. It closed unchanged on Tuesday.
The currency movement in opposite directions in inter-bank and retail markets created a difference of 0.73%, or Rs2.18, between exchange rates, which was still in line with a maximum ceiling of 1.25% in any of the five consecutive working days recommended by the International Monetary Fund (IMF) under its loan programme.
Earlier, the exchange rate gap had widened to about 10%, or Rs30, between the two markets.
The crackdown on currency smugglers and tight monitoring of currency dealers in retail trading, particularly of Category 'B' dealers, have eliminated illicit trade and supported a swift recovery of the rupee.
Financial experts pointed out that the strengthening of Pakistani rupee not only forced exporters to sell their US dollar proceeds in the inter-bank market but also helped increase the flow of workers’ remittances sent home by overseas Pakistanis.
It will result in an increase in the supply of foreign currency in the economy and shield the rupee from further depreciation.
Published in The Express Tribune, September 14th, 2023.
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