Rupee reaches 5-week high
KARACHI: The Pakistani rupee has shown a remarkable recovery in the past 12 consecutive working days, surging nearly 5% to reach a five-week high at Rs292.78 against the US dollar in the interbank market. This rate is now only Rs5 away from its pre-caretaker government level.
The currency’s upward trajectory can be attributed to an increase in the supply of foreign currency in local markets, driven by a crackdown on currency smugglers and hoarders.
According to data from the State Bank of Pakistan (SBP), the rupee strengthened by 0.38% or Rs1.10 in a single day, marking a substantial recovery to Rs292.78 against the greenback.
For context, just one day before the interim Prime Minister Anwaarul Haq Kakar was sworn in on August 15, the currency stood at Rs288.50/$. However, in the initial three weeks of the new government’s term, the currency faced a decline of 6%, amounting to Rs18.60, hitting a record low of Rs307.10/$ on September 5, 2023.
Market experts suggest that the rupee may continue its upward trend, especially if the central bank announces incentives to attract higher inflows of workers’ remittances. Additionally, the announcement of the next parliamentary election date by the Election Commission could contribute to the rupee’s stability, as political stability remains crucial for the country.
While the short-term outlook for the rupee is favourable, analysts at Topline Securities have warned that the currency may face challenges ahead, potentially reaching Rs320-340/$ by the end of the current fiscal year on June 30, 2024. Factors that could contribute to a depreciation include increased demand for dollars to pay for rising imports and to repay maturing foreign debt. Pakistan is expected to secure approximately $8 billion in new financing to cover its commercial debt repayments during FY24.
In the open market, the rupee has also witnessed a strengthening trend, gaining Rs1 to reach Rs296/$ on Thursday, following a slight loss of Rs1 to Rs297/$ on Wednesday. The retail market has seen a cumulative gain of nearly 11% or Rs32 in the past 13 working days.