Rupee falls as dollar strengthens globally

Pakistani currency depreciated Rs0.11 and settled at Rs278.51 against the US dollar at close of trading in the inter-bank market on Wednesday, maintaining its two-way movement for the past one week ahead of agreement on a new International Monetary Fund (IMF) loan programme.

According to the State Bank of Pakistan’s (SBP) data, the rupee had closed at Rs278.40 against the greenback on Tuesday.

The fresh drop in the currency value was observed after the US dollar strengthened against other major global currencies including the euro and the UK pound.

The Pakistani rupee has continued to move on both sides of the fence in line with the IMF’s recommendation to let market forces determine the value of the currency. Meanwhile, government high-ups indicate there has been a significant headway in talks on securing the IMF’s Extended Fund Facility of over $6 billion.

The local currency has remained largely stable over the past several months as it moved in a narrow range of Rs278-278.63/$.

In addition, the central bank’s strategy to purchase surplus dollars from local currency markets to stabilise the country’s foreign exchange reserves and repay foreign debt on time is also playing a critical role in the currency’s movement in a narrow band.

The rupee depreciated in the inter-bank market despite robust inflows of $3.16 billion in workers’ remittances in June 2024, which were close to the record high of $3.24 billion reached in the prior month of May. The acceleration in remittances suggests that supply of the foreign currency has stood high in the inter-bank market.

Exchange Companies Association of Pakistan (ECAP) reported that the local currency regained Rs0.50 on a day-on-day basis, closing at Rs280.50/$ in the open market.

The consecutive gains in retail trade have helped narrow the disparity between currency values in the two markets to 0.71%, or almost Rs2, which is well below the IMF-recommended level of 1.25% (around Rs3.50).