Forex reserves surge to four-week peak

Pakistan's foreign exchange reserves, held by the State Bank of Pakistan (SBP), hit a four-week high at $9.27 billion, helping the rupee stay pegged at Rs278.70 against the greenback for the second successive working day in the inter-bank market on Thursday.

According to the SBP data, the central bank reserves rose $119 million to $9.27 billion during the week ended August 9, 2024.

Though the central bank cited no reason for the increase in reserves in its brief statement, the bank had acknowledged recently that it was purchasing foreign currency from local markets to boost reserves.

Robust inflows of workers' remittances, reaching $3 billion, in July and improvement in export earnings increased supply of the greenback to the market, which was in surplus, compared to muted dollar demand for imports. The central bank is absorbing the surplus supply. However, this buying has not let the rupee strengthen further. Rather, the rupee-dollar exchange rate has remained stable around current levels for the past six months.

Despite the latest surge, the forex reserves still stand low as they provide import cover for around two months only. Reserves with commercial banks increased $54 million on a week-on-week basis and settled at $5.37 billion. Accordingly, the country's total foreign exchange reserves surged $173.3 million to $14.65 billion.

In inter-bank dealings, the rupee remained unchanged at Rs278.70 against the greenback for the second consecutive day, ending the modest downward trend seen in the prior two working days.

Exchange Companies Association of Pakistan reported that the rupee remained stable at Rs280.40/$ for the eighth consecutive working day in the open market.