Rupee hits three-month high against US dollar

Reaches just below Rs286/$ on improved supply of foreign currency

KARACHI:

In a remarkable streak, the Pakistani currency has surged to its highest point in nearly three months, reaching just below Rs286 against the US dollar in the interbank market on Tuesday. This sustained rise comes on the back of a consistent 19-day winning streak, driven by an improved supply of foreign currency within the domestic economy.

According to the State Bank of Pakistan (SBP) data, the rupee has extended its gains by 0.36%, equivalent to Rs1.04 on a day-to-day basis, ultimately closing at Rs285.72 against the US dollar on the day.

This is a level last witnessed on July 20, 2023, as reported by the central bank.

In total, the Pakistani currency has strengthened by an impressive 7.48% or Rs21.38 over the past 19 working days, compared to its record low of Rs307.10/$ on September 5, 2023.

Market experts suggest that the rupee could have potentially recovered even further, reaching the range of Rs250-260/$, had the central bank not intervened by purchasing excess supplies of foreign currency from the market. This suggests that there may still be room for further significant gains in the future.

The central bank typically intervenes in the market by providing foreign currency supplies when it deems necessary, absorbing surplus supplies to maintain the country’s foreign exchange reserves at a higher level.

Reports indicate that law enforcement agencies have gathered data on individuals hoarding foreign currencies amounting to $50 million at home and may take action to recover these currencies. This development has encouraged many to sell their holdings, resulting in a surge in supplies.

In the open market, currency dealers are receiving ample supplies from individuals, but buyers are scarce at their retail counters. Consequently, they have been selling supplies amounting to $40-50 million in the inter-bank market every week. Meanwhile, recent trade data shows that exports have improved by 4%, while imports have decreased by 13% in September compared to August. This has increased the supply of foreign currencies in the local markets.

Published in The Express Tribune, October 4^th, 2023.

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