Rupee rebounds to Rs278.81 against US dollar after sharp drop

Domestic currency had experienced a sharp drop of 1.16% reaching a one-week low at Rs280.29 per US dollar yesterday

KARACHI:

Despite recent setbacks, the Pakistani rupee exhibited resilience, quickly recovering to a rate slightly below Rs279 against the US dollar in the inter-bank market on Thursday. This positive turn of events can be attributed to the assurance from "authorities concerned" that no unusual demand for foreign currency exists in the market.

According to the most recent data from the State Bank of Pakistan (SBP), the domestic currency rebounded by 0.53%, gaining Rs1.48 on a day-to-day basis, closing at Rs278.81 against the US dollar.

Just the previous day, the currency had experienced a sharp drop of 1.16%, equivalent to Rs3.26, reaching a one-week low at Rs280.29 per US dollar. The drop was primarily fueled by reports of heightened demand for dollars from importers and for interest payments to global investors associated with their investments in Pakistani Eurobonds and Sukuk in international markets.

General Secretary of the Exchange Companies Association of Pakistan (ECAP), Zafar Paracha, attributed the sharp drop to banks, alleging that they had once again attempted to manipulate the rupee-dollar parity by speculating about additional demand for the dollar from importers and the government for interest payments.

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However, in response to these concerns, authorities who had recently conducted a crackdown against foreign currency smugglers and hoarders verified that there was no additional and unusual demand for the greenback in the market. As a result, the rupee made a partial recovery from its earlier losses, as Paracha noted.

He expressed optimism, suggesting that the rupee is expected to maintain its upward trajectory, which had been interrupted at around Rs277 on Tuesday. Paracha even went as far as to predict that the rupee could regain its strength to reach Rs260 against the US dollar during the ongoing upward trend.

In the weeks leading up to this, the rupee had cumulatively strengthened by 11%, appreciating by over Rs30 to reach a three-month high at Rs276.83 against the US dollar. This progress was a direct result of the extensive crackdown on illicit foreign exchange activities.

In the open market on Thursday, the rupee regained Rs1 against the US dollar on a day-to-day basis, according to ECAP.

Paracha noted that the supply of foreign currency has continued to rise in the market, with the open market recording the sale of a record $500 million in a month within the inter-bank market for the first time in seven to eight months.

The influx of workers' remittances and increased export earnings have contributed to an overall boost in the supply of currency in the markets.

Recent trade numbers indicate that the trade deficit remains under control, and the large-scale manufacturing sector has exhibited better performance. Paracha attributed these improvements to strengthening economic fundamentals, which, in turn, are bolstering the Pakistani rupee.