Rupee holds strong against dollar as supply increases

DPC doubles guarantee for eligible depositors to Rs1m, boosts confidence in banking sector

KARACHI:

The Pakistani rupee inched up by Rs0.02 to close at Rs277.69 against the US dollar in the inter-bank market on Tuesday, maintaining stability near a six-month high.

This uptick is attributed to improved foreign currency supply in the market.

According to State Bank of Pakistan (SBP) data, the rupee appreciated by a net Rs1.13 (0.41%) over the past three weeks, reaching a six-month high of Rs277.64 per dollar on Friday.

The Exchange Companies Association of Pakistan (ECAP) reported that the domestic currency improved by Rs0.10 in the open market on a day-to-day basis, closing at Rs279.84 against the greenback.

This marked the seventh consecutive day of gains for the rupee.

The rupee's strength in the inter-bank market is largely due to increased dollar sales by exporters, who expect the currency to further strengthen in the coming weeks.

This confidence stems from the recent $7 billion Extended Fund Facility awarded by the International Monetary Fund (IMF), along with the disbursement of a $1.03 billion tranche last week.

The IMF's latest bailout is expected to attract additional foreign funding from multilateral and bilateral creditors, including the Asian Development Bank (ADB), China, Saudi Arabia, and the UAE, providing further support to the rupee.

Additionally, a $1 billion investment by a Chinese company in Pakistan's oil refinery sector and the arrival of an ADB delegation to assist with the privatisation of state-owned entities (SOEs) and revenue collection reforms have also contributed to the rupee's upward trajectory.

Meanwhile, the rupee has gained Rs0.86 over the past seven working days as the central bank extended the allowance for exchange companies to import dollars in cash against the export of other foreign currencies until June 2025.

This move has increased the dollar supply in the open market, helping the rupee remain strong.

Deposit protection raised to Rs1 million

Meanwhile, the Deposit Protection Corporation (DPC) announced an increase in the guaranteed amount for depositors of member banks, raising the limit from Rs500,000 to Rs1,000,000, effective October 1, 2024.

This enhanced guarantee now provides full protection to approximately 96% of eligible depositors, further strengthening confidence in the banking sector and supporting financial stability in Pakistan.

The guarantee becomes payable only if the SBP declares a bank as failed.