Rupee stable at three-month high

Dollar supply and demand appear evenly balanced

KARACHI:

Pakistani currency on Tuesday stood stable above three-month high at Rs279.42 against the US dollar in the inter-bank market as foreign currency supply and demand appeared evenly balanced.

According to State Bank of Pakistan’s (SBP) data, the rupee ticked down Rs0.01 on a day-on-day basis, closing at Rs279.42 against the greenback.

The domestic currency has cumulatively increased 9.90%, or Rs27.68, in the past over four months compared to the record low of Rs307.10/$ hit in the first week of September 2023.

Exchange Companies Association of Pakistan (ECAP) reported that the rupee slightly appreciated by Rs0.03 and closed at Rs281.13/$ in the open market.

The difference between currency values in the two markets remained moderate at 0.61%, or Rs1.71, compared with the maximum spread of 1.25% (around Rs4 at the current exchange rate) recommended by the International Monetary Fund (IMF).

The rupee remained stable after both import payments and export earnings increased for January 2024, suggesting that the demand and supply of foreign currency was quite balanced in the market.

Market talk suggests that the rupee will continue to move around current levels till the next political government is formed in the aftermath of general elections scheduled for Thursday (February 8).

Read Rupee rises, but market gap widens

Later, the demand and supply of foreign currency will depend on the economic policies and reform agenda to be pursued by the new government.

The currency market will closely observe government’s moves to see whether it will again approach the IMF for another bailout package. At present, Pakistan is under a $3 billion standby arrangement with the IMF, which will end in March this year.

The timing of the new loan programme will give a clear direction to the rupee-dollar exchange rate. Any delay will mount pressure on the rupee.

Secondly, if the government opts to ramp up imports without improving export proceeds and inflows of worker remittances, it will also put the rupee under pressure.

Published in The Express Tribune, February 7^th, 2024.

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