Rupee gains 67 paisas in interbank market after a weak week

Analysts say strengthening of rupee due to surge in foreign reserves, contraction in trade deficit and expectation of higher remittances ahead of eid

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KARACHI: The exchange rate of Pakistani rupee strengthened by 67 paisas against the United States (US) dollar in the interbank market on Friday to close at Rs166.21 compared to its last closing of Rs166.88 on Thursday.

However, according to the Forex Association of Pakistan, the buying and selling rates of the US dollar in the open market were recorded at Rs166.5 and Rs167.5 respectively on Friday.

Despite analysts’ concerns regarding the weakening of Pakistani rupee over the past week, the strengthening of the rupee is attributed to the supply of dollars.

Liquid foreign exchange reserves held by the State Bank of Pakistan (SBP) increased by 7.42 per cent on a Week on Week (WoW) basis from $16,730 million to $17,971 million. Net Reserves with SBP also increased by Rs1.27 billion.

“There have been several positive developments recently and stabilisation of the rupee was expected,” says Capital Stake Director Research Maha Jafer Butt.

“With the financial year-end close effect over now, the rupee has responded well to the surge in foreign reserves, contraction in the trade deficit and expectation of higher remittances ahead of eid.”

Pakistan Kuwait Investment Company Assistant Vice President Research Adnan Sheikh says: “After inflows of $3 billion in the last two weeks, the supply of dollars has improved in the market and hence the pressure on the rupee has been alleviated for the time being”.

This upward trend in the rupee, however, is momentary and may not be long-lived. “Going forward, resumption of economic activities and imports and lowering of interest rates along with higher crude oil prices will put pressure on Pakistan’s deficit and in turn the rupee,” he adds.

According to SBP, the interbank price of Euro depreciated by Rs1.91 to close at Rs 186.63 on Friday, against the last day’s close at Rs 188.54.

The Japanese Yen lost one paisa to close at Rs1.54, whereas a decrease of Rs2 was witnessed in the exchange rate of British pound which was traded at Rs206.99 compared to its last closing of Rs208.99.

The exchange rates of Saudi riyal and UAE dirham decreased by 18 paisas each to close at Rs44.31 and Rs 45.25 respectively.

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