Rupee gains on rising forex reserves, Moody's upgrade

Currency appreciates after two-day decline as supply of US dollars increases

KARACHI:

The Pakistani rupee appreciated by Rs0.10, closing at Rs278.54 against the US dollar in the inter-bank market, breaking a two-day losing streak due to an increase in the supply of foreign currency within the domestic economy.

According to data from the State Bank of Pakistan (SBP), the local currency had cumulatively lost Rs0.32 over the past two days, reaching Rs278.64 against the dollar on Thursday. The Exchange Companies Association of Pakistan also reported a Rs0.25 improvement in the currency, pushing it to Rs279.75 per dollar, after eight consecutive days of stability at Rs280 per dollar.

The appreciation appears to be a result of an increase of $112 million in the country's foreign exchange reserves held by the SBP, which rose to a six-week high of $9.40 billion on Thursday. Strong inflows from workers' remittances and improved export earnings have been the primary drivers of this increase. The SBP has been purchasing the surplus supply of US dollars from local markets.

Market speculation suggests that the rupee's recovery also received a boost from Moody's Ratings' upgrade of Pakistan's credit rating. This rating upgrade has made it cheaper for the country to raise new financing in global markets, supporting the government's plans to launch Panda and Eurobonds internationally.

Furthermore, the government's recent move to increase incentives for banks and exchange companies to attract remittances is expected to keep the supply of foreign currency strong.