Rupee stabilises near 279

China’s rollover of $2b loan signals market confidence

KARACHI:

The Pakistani rupee is showing signs of stability, hovering slightly over Rs279 against the US dollar in the interbank market, even as the country's foreign exchange reserves held by the State Bank of Pakistan (SBP) slipped to below $8 billion, a two-month low.

According to SBP’s data, the domestic currency ticked up by Rs0.01, closing at an over four-month high at Rs279.11 against the greenback on Thursday.

Over the past five and a half months, the currency has cumulatively gained 10% or Rs28, compared to all-time low hit of Rs307.10/$ recorded in the first week of September 2023.

The currency has been moving in a narrow band between Rs279-280/$ for a little more than a month, suggesting that the rupee may be moving towards stabilisation at its current levels.

Additionally, the Exchange Companies Association of Pakistan (ECAP) reported that the rupee remained unchanged at Rs282.04/$ for the third straight working day in the open market.

The country’s foreign exchange reserves (held by SBP) dropped by $63 million on foreign debt repayment, slipping to a two-month low at $7.85 billion in the week ended February 23, 2024, according to the central bank’s weekly update on Thursday.

Read With loan rollover, rupee appreciates further

Meanwhile, the Caretaker Finance Minister Shamshad Akhtar confirmed to Reuters that China has rolled over $2 billion deposits at SBP. This development puts an end to the speculation in the currency markets that the government was arranging financing to pay off the huge sum to Beijing in March 2024.

However, it is important to note that the reserves provide import cover for less than two months.

Earlier, the reserves were maintained at above $8 billion in the past eight consecutive weeks, despite little fluctuation due to official inflows and outflows. However, for the second successive week, the reserves have maintained a downturn on foreign debt repayments, according to the central bank.

On the other hand, the foreign exchange reserves held by commercial banks remained stable at $5.08 billion on a week-on-week basis.

Accordingly, the country's total foreign exchange reserves stood at $13.03 billion in the week under review.

Published in The Express Tribune, March 1^st, 2024
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