Pakistani currency hit a three-month high at slightly below Rs280 against the US dollar in the interbank market on Monday, remaining on its winning streak for the fourth consecutive day over optimism about an increase in inflows of foreign currency.
According to SBP data, the rupee ticked up 0.02%, or Rs0.05, and closed at Rs279.85 against the greenback. The currency has cumulatively gained 9.74%, or Rs27.25, in the past four and a half months compared to the record low of Rs307.10/$ hit in the first week of September 2023.
Exchange Companies Association of Pakistan reported that the rupee remained unchanged at Rs281.07/$ in the open market for the second consecutive working day.
Read Rupee soars to 12-month high
Market talk suggests that exporters are now selling their withheld dollar proceeds in the inter-bank market following normalisation of diplomatic ties between Pakistan and Iran. Earlier, they partially held back dollar sales in the wake of tensions between the two neighbours over airspace violations.
The demand for US dollars is anticipated to go down after the IMF recommended Pakistan to come up with a mini-budget to increase tax collection and maintain a tight monetary policy.
However, the announcement of mini-budget will keep inflation at elevated levels. To counter that, the central bank will either keep its policy rate at the record high of 22% or further increase the borrowing cost.
Published in The Express Tribune, January 23rd, 2024.
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