Rupee falls first time in four weeks
photo: file
After recovering 11% in the past 28 consecutive working days, Pakistani currency on Tuesday depreciated 0.07% and closed at Rs277.03 to a dollar in inter-bank market on the back of uptick in demand for the greenback.
Market talk suggests the rupee has reached its “fair value” at Rs277/$ and the slight correction did not come as a surprise.
A big question is whether the currency will resume its uptrend in a day or two, stabilise around current levels in the short to medium term or start losing the hard-earned gains of the past four weeks.
The emerging situation suggests exporters have sold their future earnings in foreign currencies on forward counters. Some of them have sold dollars without having physical possession in the hope they will buy back at a better price at some suitable time later.
Market people were of the view that the rupee would recover to Rs250-260/$ in the near future.
On the other hand, some importers have refrained from buying foreign currency as they waited for the rupee-dollar exchange rate to settle down at some point. It signals that the demand for US dollars has accumulated and the high supply and low demand situation may remain at least in the short run.
Earlier, the currency made a cumulative recovery of 10.93%, or Rs30.27, over 28 consecutive working days, which was the longest rally in three years. The rupee also won the title of world’s best-performing currency in recent weeks.
The currency had hit the record low at Rs307.10/$ on September 5, 2023 amid installation of the caretaker government.
The recovery began in the wake of a government crackdown on foreign currency smugglers and hoarders to eliminate the black market. The action helped increase the flow of dollars in the market, meeting the demand from importers.
The end of the illegal currency business also forced exporters to sell their holdings sooner rather than later and encouraged overseas Pakistanis to send remittances back home through official channels.
In open market, the currency closed unchanged at Rs277/$ on a day-to-day basis, according to the Exchange Companies Association of Pakistan (ECAP). The currency had cumulatively regained 18.41%, or Rs51, in retail market in the past six weeks.
JS Research reported that the real effective exchange rate (REER) – the value of Pakistani currency against a basket of currencies of its trading partners – appreciated to a one-year high at 103.
Published in The Express Tribune, October 18th, 2023.
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