Policy status quo helps rupee resume uptrend

Currency hits 3-month high at 279.55 against dollar

KARACHI:

Pakistani currency resumed its uptrend on Tuesday after dropping a little bit a day ago, reaching over three-month high at Rs279.55 against the US dollar in inter-bank dealings.

The rupee got renewed support from the central bank’s decision to leave its benchmark policy rate unchanged at a record high of 22% for the next six weeks. The high cost of bank borrowing discourages imports, controls the soaring inflation and keeps demand for the greenback low compared to inflows in the economy.

According to State Bank of Pakistan’s (SBP) data, the domestic currency appreciated 0.03%, or Rs0.09, on a day-on-day basis in the inter-bank market. With the latest rise, the currency has cumulatively increased 9.85%, or Rs27.55, in the past four months since hitting the record low at Rs307.10/$ in the first week of September 2023.

Exchange Companies Association of Pakistan (ECAP) reported that the rupee gained 0.08%, or Rs0.23, and closed at Rs280.86/$ in the open market.

Read Rupee slips after 3-month high against dollar

Talking to The Express Tribune, ECAP General Secretary Zafar Paracha said the currency had strengthened on the back of increase in supply of the greenback compared to its relatively lower demand.

“Both currency markets are taking cue from the demand and supply situation of the foreign currency as they now rely on a market-based system,” he said. The ECAP general secretary anticipated that the rupee would maintain its uptrend under the ongoing cycle of appreciation and would potentially rise to the high of Rs270/$ over the next four to six weeks.

He pointed out that the rupee had continued to strengthen in the wake of administrative measures taken by the government and the central bank including a crackdown on foreign currency smugglers and hoarders in the country.

He revealed that sales of dollars by currency exchange companies in the inter-bank market had increased to an average of $300-350 million a month compared to $40-50 million a month before the administrative measures were enforced in the first week of September.

Published in The Express Tribune, January 31^st, 2024.

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