State Bank pumps Rs1.4tr into banks

Rupee strengthens for fifth week; gold falls Rs1,500/tola as global prices swing

KARACHI:

The State Bank of Pakistan (SBP) injected a staggering Rs1.4 trillion into the financial system on Friday through dual open market operations, using both conventional and Shariah-compliant instruments to manage the huge liquidity demand.

In the conventional reverse repo operation, the SBP injected Rs1.037 trillion against total offers of Rs1.150 trillion. The central bank accepted Rs76 billion at 11.06% for seven-day tenor and Rs962 billion at a cut-off rate of 11.04% for 13-day tenor, with pro rata allotment applied where necessary.

Simultaneously, the SBP conducted a Shariah-compliant Mudarabah-based injection of Rs363 billion, accepting all offered bids – Rs241 billion at 11.14% for seven days and Rs122 billion at 11.13% for 13 days.

Moreover, the Pakistani rupee registered a marginal gain against the US dollar, appreciating 0.01% in the inter-bank market. At close, the local currency settled at 281.90, up two paisa compared with the previous day's close at 281.92. This marked the rupee's 11th consecutive session of gains against the greenback.

According to Ismail Iqbal Securities, the rupee has now appreciated 0.66% in the current fiscal year to date, although it remains down 1.19% on a calendar-year-to-date basis.

Analysts at AKD Securities highlighted that the rupee has strengthened for the fifth consecutive week, reflecting improved sentiment amid stability in foreign exchange reserves and remittance inflows.

Meanwhile, gold prices in Pakistan fell, contrary to movements in the international market, where bullion rebounded after comments from US Federal Reserve Chair Jerome Powell fueled expectations of a September rate cut at the Jackson Hole symposium.

According to the All Pakistan Sarafa Gems and Jewellers Association, the price of gold declined Rs1,500 to settle at Rs355,700 per tola, while the rate for 10 grams dropped Rs1,286 to Rs304,955. A day earlier, gold had gained Rs2,000 to close at Rs357,200 per tola.

Internationally, spot gold was up 0.7% at $3,362.53 per ounce by 10:26 am EDT (1426 GMT), while US gold futures were 0.8% lower at $3,408.20, Reuters reported.

Market analysts noted that initially gold traded in a narrow $25-40 range, with little momentum amid lack of progress in the geopolitical situation such as the Russia-Ukraine conflict. However, Powell's remarks that future data could warrant interest rate cuts triggered renewed buying, lifting prices to the high of $3,380.

Interactive Commodities Director Adnan Agar said that the market remained range bound but faced strong resistance at the $3,400 level. "If gold breaks this barrier, the next target is projected around $3,450," he said.

Agar added that expectations of a downward shift in US interest rates, combined with persistent geopolitical risks, continue to bolster the metal's appeal as a safe-haven asset.

With US rates having remained unchanged for an extended period, the possibility of an imminent cut has reinforced bullish sentiment, though traders caution that volatility will likely persist in the short term.