Rupee slips to Rs277.71 on uptick in dollar demand

The Pakistani rupee depreciated by Rs0.07, closing at Rs277.71 against the US dollar in the inter-bank market, likely due to an uptick in demand for the greenback or a drop in supply. This marks a pullback from the over six-month high the rupee achieved over the weekend.

According to State Bank of Pakistan (SBP) data, the domestic currency had gained a net Rs1.13 (or 0.41%) in slightly over three weeks, rising from a five-and-a-half-month low of Rs278.77/$ at the start of September 2024 to Rs277.64/$ by Friday.

Meanwhile, the Exchange Companies Association of Pakistan (ECAP) reported that in the open market, the currency appreciated by Rs0.21 to Rs279.94/$ on Monday compared to Rs280.15/$ on Friday.

The currency is expected to consolidate around its current level in the inter-bank market in the short to medium term, particularly after Pakistan secured a $7 billion loan programme from the International Monetary Fund (IMF) last week, receiving an initial tranche of $1.03 billion.

Market talks suggest that the rupee's gains were driven by increased dollar sales by exporters in the futures market at a lower premium, as there were projections the rupee would strengthen further after the 37-month Extended Fund Facility (EFF) was approved.

Financial experts believe the rupee has the potential to appreciate to around Rs270-275/$ in the next couple of months and may settle in the range of Rs270-280/$ by December 2024.

They noted that in the first two months (July-August) of the current fiscal year (2024-25), the supply of foreign currency outpaced demand due to robust inflows from workers' remittances sent by overseas Pakistanis and a notable improvement in export earnings.

As for the continued uptrend in the open market, the central bank's decision to allow exchange companies to import US dollars in cash form against the export of other foreign currencies has kept the supply of greenbacks significant in the retail market.