Rupee hits seven-week high

Uptick in foreign currency supply propels currency to Rs283; stable demand maintains winning streak

KARACHI:

The Pakistani currency achieved a nearly seven-week high at Rs283 against the US dollar on Tuesday in the interbank market. This surge marks the sixth consecutive working day of gains, spurred by an increase in the supply of foreign currency in the system.

According to data from the State Bank of Pakistan (SBP), the domestic currency appreciated by 0.07%, or Rs0.20, reaching Rs283.01 against the greenback. Over the past three weeks, the currency has cumulatively improved by 0.93%, amounting to Rs2.63.

In the open market, the Exchange Companies Association of Pakistan (ECAP) reported a 0.08% enhancement, or Rs0.25, closing at Rs284.25/$.

Speaking to The Express Tribune, Economist, Sana Tawfik from Arif Habib Limited attributed the rupee’s positive momentum to the recent turnaround in the balance of the current account, registering a slight surplus of $9 million in November. The stability in the supply of foreign currency, coupled with no significant uptick in demand, has allowed the domestic currency to maintain its upward trajectory.

Read Rupee appreciates further

Tawfik noted that the rupee is expected to remain stable leading up to the International Monetary Fund (IMF) executive board meeting on January 11. The meeting will decide on the release of the next tranche of $700 million to Pakistan under its ongoing $3 billion Stand-by Arrangement (SBA). Approval of the instalment is anticipated to unlock inflows from other multilateral and bilateral creditors, providing further support to the rupee.

Predicting the rupee’s trajectory, Tawfik stated that it might close the current calendar year at below Rs290/$ by the end of December 2023. She anticipates a gradual depreciation to Rs315/$ by the end of June 30, 2024, driven by an expected rise in imports in FY24. Despite this, she emphasised that the manageable current account deficit and projected increase in foreign exchange reserves would prevent significant depreciation during FY24, keeping it within the range of $3.5-4 billion.

Published in The Express Tribune, December 20^th, 2023.

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