Pakistani rupee posts biggest weekly gain in 93 weeks amid improved dollar supplies

The Pakistani rupee surged on Friday, marking its largest weekly gain in 93 weeks, driven by improved dollar supplies, a crackdown on black market currency trade, and a shift in the central bank’s strategy for building forex reserves. 

The currency rose 0.27% to 283.45 against the dollar, with a 0.5% weekly gain. In the open market, the rupee strengthened by Rs1.05, reaching 286.55 per dollar.

The recent appreciation followed a series of actions by law enforcement agencies targeting currency smugglers. Additionally, the State Bank of Pakistan’s decision to slow down its dollar purchases for reserve building has contributed to the rupee’s gains.

Market analysts noted that the crackdown on illegal currency exchanges, strong remittances, and improving external economic indicators were helping stabilise the currency. 

Bloomberg, citing Citigroup Inc., reported that while Pakistan’s central bank will continue building its reserves, it will do so at a slower pace, preventing excessive pressure on the rupee.

In a related development, S&P Global Ratings upgraded Pakistan’s long-term sovereign credit rating on Thursday from ‘CCC+’ to ‘B-’ with a stable outlook, marking the first return to the ‘B-’ rating since July 2022.

Meanwhile, Pakistan’s dollar bonds also saw a rise, reflecting growing investor confidence in the country’s economic recovery. The yield on the Eurobond maturing in 2031 dropped 55 basis points compared to the previous week, reaching 9.0%, while the yield on bonds maturing in 2036 decreased by 38 basis points to 10%.