Rupee regains lost ground vs dollar

Pakistani currency strengthened Rs0.10 and closed at Rs278.40 to a dollar in the inter-bank market on Tuesday, maintaining its nominal fluctuation on both sides of the fence for the fifth consecutive working day amid mixed sentiment in the market.

According to the State Bank of Pakistan’s (SBP) data, the rupee had closed at Rs278.50 against the greenback on Monday. The latest appreciation in the currency came after international crude oil prices dropped significantly. Arab Light crude, which is mainly imported by the Pakistani refineries, fell notably below $90 per barrel, which eased the requirement for dollars in the banking system.

Besides, robust inflows of workers’ remittances in June 2024, calculated at $3.2 billion, helped increase the supply of foreign currency and supported the local currency in regaining the lost ground. In terms of net change, the Pakistani currency has lost a meagre Rs0.06 in the initial days of fiscal year 2024-25, beginning July 1, which indicated that the currency has largely remained stable around current levels.

The rupee has stayed in the range of Rs278-278.63/$ over the past several months, backed by the increase in foreign currency supply and muted demand for imports.

Exchange Companies Association of Pakistan (ECAP) reported that the rupee regained Rs0.50 on a day-on-day basis and settled at Rs281/$ in the open market.

Financial experts are split over the short-term outlook for the rupee. Many anticipate the currency will see a notable devaluation ahead of the International Monetary Fund (IMF) loan programme of over $6 billion by the end of July 2024 as currency depreciation is a key condition for the bailout. Other analysts project the rupee will remain stable for up to six months based on the premise the IMF programme will help accelerate the inflow of foreign currency from the Fund and other multilateral and bilateral creditors.