PKR appreciates against US dollar in 10th consecutive session

Local currency among worst performers in region despite 10 sessions of gains

LAHORE: The Pakistani rupee continued to strengthen against the US dollar for the tenth successive working day, gaining Rs1.51 to close at Rs213.98 in the interbank market on Monday.

In light of the news pertaining to foreign exchange inflows from Saudi Arabia have strengthened the PKR rally in the interbank market.

According to a report by Bloomberg, the Saudi Finance Ministry is planning to renew its $3 billion deposit with the State Bank of Pakistan (SBP) as soon as this week. The kingdom is also considering to provide $100 million a month for 10 months in petroleum products that will be granted as additional support.

FAP Chairperson Malik Bostan attributed the rupee’s rise to the International Monetary Fund’s (IMF) letter of intent and reports of assistance from friendly countries, especially Saudi Arabia.

He said the market expected that payment from the IMF would be received soon which would increase the country’s foreign reserves.

The FAP chairperson said the greenback’s real price was between 190 and 200 but speculators had “artificially increased it because of the economic issues and the risk of default”. He added, however, that the dollar would come back to its real price soon.

Mettis Global Director Saad bin Naseer said the local currency had risen because dollars were flowing into the country, adding that more inflows were expected.

“Exporters, who had been holding their dollars abroad, are also bringing them into Pakistan now because the greenback is depreciating quickly,” he added.

Naseer said there was “pressure” as exporters were approaching the government and other bodies to urge them to stabilise the exchange rate since they are facing losses. “But this will always happen. The best suggestion is that the dollars should be converted into rupees the same day that the export [consignment] is sent and the government and banks should sign a memorandum of understanding in this regard which will end the uncertainty.”

He said that the rupee will continue to strengthen and gain in the coming days if the political situation remained stable.

“This week’s start has been very good. Positive news is coming from every front because of which sentiments have changed,” Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha said.

He added that because of the positive developments, exporters who had been previously holding onto dollars were looking to sell them but importers were waiting for the greenback to fall further.

Paracha said there were reports that Saudi Arabia would roll over a $3 billion loan and provide oil on deferred payments while the IMF tranche would be received soon which is why the PKR was recovering.

Overseas Pakistanis and exchange companies had played a very important role in the rupee’s recovery, he said. The ECAP secretary general called for incentives and rebates to be given to overseas Pakistanis and exchange companies along with designating them as an “export industry”.

On Friday, the Pakistani rupee had gained Rs3.38 to close at Rs215.50 against the US dollar in the interbank market.

However, a report by The Business Recorder noted that despite the significant gains since July 28, the Pakistani rupee (PKR) remained the worst-performing currency in the region after the Sri Lankan Rupee during 2022.

By the end of Monday’s session (August 15), the rupee, which had kicked off the year at 176.51 against the US dollar, depreciated 17.5%.

Barring Sri Lanka that announced a default in April 2022, the Pakistani currency was the worst performer by a stretch, with Bangladesh (9.4%) and Korea (8.9%) following, a note by brokerage house Topline Securities showed.

The dataset featured 12 major Asian economies including Philippines, India, Malaysia, China, and Vietnam among others.

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