The Pakistani currency showcased its resilience on the eighteenth consecutive working day, surging to a two-month high against the US dollar in the interbank market. State Bank of Pakistan (SBP) data reveals that the domestic currency has strengthened by 0.34%, or Rs0.98, to close at an impressive Rs286.76 against the greenback.
This remarkable rally has seen the rupee gain a cumulative 7%, equivalent to Rs20.34, over the past 18 days—an impressive feat by all measures.
In the open market, the local currency saw a 0.52% increase of Rs1.50, closing at Rs286.50 against the US dollar in the day, according to the Exchange Companies Association of Pakistan (ECAP).
The sustained appreciation of the rupee can be attributed to an increased supply of the greenback. Recent trade data further supports this, with export earnings up by 4% and import payments decreasing significantly by 13% in September compared to the month of August.
Data from Topline Research indicates that the Pakistani rupee continues to outperform most other world currencies on a daily basis, as many currencies continue to depreciate against the US dollar.
Recent reports also suggest that export earnings and official channels for workers’ remittances have improved compared to the period before the government’s crackdown on currency smuggling.
Intriguingly, there are discussions in the market that black markets are offering the US dollar at a lower price (in terms of rupee value) compared to the official markets.
While a treasury firm projected the rupee would stabilise around Rs285/$ in the current cycle of appreciation in the interbank market, the prolonged crackdown on currency smuggling may extend the rupee’s rally beyond this level. However, it’s essential to monitor this situation closely, as excessive appreciation could have implications for imports and exports.
Meanwhile, official currency markets have seemingly brushed off a slight dip in the country’s foreign exchange reserves, held by the SBP, due to foreign debt repayments last week. This downturn follows a brief uptick in the previous week, indicating a complex interplay of factors affecting the Pakistani rupee’s exchange rate.
Published in The Express Tribune, October 3rd, 2023.
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