The Pakistani rupee depreciated by Rs0.09 to close at Rs277.79 against the US dollar in the inter-bank market on Monday, driven by expectations of rising dollar demand following an aggressive 2.5 percentage point rate cut by the central bank.
The foreign exchange market may see further declines in the rupee's value in the coming days, as the policy rate reduction was steeper than the financial market's anticipated two percentage points. The State Bank of Pakistan (SBP) announced its rate cut after the capital markets had closed.
This latest decline has partially reversed Friday's gains, where the rupee appreciated by Rs0.15 to close at Rs277.70 per dollar, according to SBP data. In the open market, the Exchange Companies Association of Pakistan (ECAP) reported an Rs0.08 drop in the local currency, closing at Rs278.71 against the dollar on Monday, compared to Rs278.63 on Friday.
In its latest monetary policy, the SBP stated that imports of raw materials and machinery are gradually increasing, suggesting a continued liberalisation of imports in fiscal year 2024-25.
Nonetheless, a recovery in the rupee remains possible, as SBP Governor Jameel Ahmad indicated the country is expected to receive $500 million in fresh financing from the Asian Development Bank (ADB) next week. Inflows from workers' remittances sent home by overseas Pakistanis are also projected to exceed the average monthly receipts of $3 billion in October 2024, he added.
A local research house projected on Saturday that the rupee would remain stable in the range of Rs277-282 per dollar through the end of fiscal year 2024-25, with a 0.3% appreciation recorded over the first four months.
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