Rupee gets support from rise in forex reserves

Currency touches new six-week high at 283.26 vs dollar

KARACHI:

Pakistani currency on Friday improved to a new six-week high below Rs283.50 against the US dollar in the inter-bank market, maintaining its positive momentum for the fourth consecutive day in the wake of higher inflows of foreign currency.

According to State Bank of Pakistan’s (SBP) data, the rupee gained 0.09%, or Rs0.25, and closed at Rs283.26 against the greenback. Exchange Companies Association of Pakistan reported that the currency remained unchanged at Rs284.50/$ in the open market for the third successive day.

The rupee got support from an uptick in Pakistan’s foreign exchange reserves, held by the SBP, which increased $21 million to $7.04 billion in the week ended December 8, 2023. The central bank is apparently purchasing surplus US dollars from the market to build its reserves.

Read Foreign inflows propel rupee to Rs283.5 vs dollar

Caretaker Finance Minister Dr Shamshad Akhtar said earlier this week that Pakistan was expected to receive $4.5 billion from multilateral and bilateral creditors in the current fiscal year in addition to the IMF loan tranche of $700 million.

The inflows will not only help increase the country’s foreign exchange reserves to the target of $9 billion by the end of June 2024, but will also provide strength to the currency.

The currency has cumulatively increased by a net 0.84%, or Rs2.38, in the past three weeks. It found renewed support from the IMF’s staff-level agreement at the completion of first review under the $3 billion loan programme in mid-November. It will pave the way for the release of second loan tranche of $700 million in January 2024.

Market talk suggests that a drop in international crude oil prices also proved supportive for the rupee.

Published in The Express Tribune, December 16^th, 2023.

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