The Pakistani currency hit a one-month high of just below Rs 285 against the US dollar in the interbank market, maintaining its winning streak for the fifth consecutive business day on Monday. This rise comes amid an improved supply of foreign currency in the system.
According to State Bank of Pakistan (SBP) data, the domestic currency appreciated by 0.15% or Rs 0.44 to close at Rs 284.53 against the dollar. In the last five business days, the coin has gained cumulatively by 0.39%, or Rs 1.11.
Equities Association of Pakistan (ECAP) reported a gain of 0.17% or Rs0.50 to close at Rs285.50/$ in the open market.
This positive trend is attributed to central bank reports indicating an increase in foreign exchange reserves (held by the SBP), up by $77 million to $7.225 billion in the previous year.
Market reports suggest that the central bank is actively buying excess US dollar supplies from the interbank market. This move not only allows the SBP to acquire surplus supplies at a rising price but also stabilizes foreign reserves, which currently provide coverage for two months of imports.
Reading: Rupee surges to one-month high, closes below Rs285/$
Optimism surrounds the imminent approval by the International Monetary Fund (IMF) executive board to release the next tranche of $700 million in December 2023 or January 2024. This approval is expected to unlock an additional 1.5-2 billion dollars from other multilateral and bilateral creditors.
In mid-November, IMF staff approved the tranche after successfully completing the first domestic financial review under the current $3 billion loan program.
In addition, the expected inflow of multibillion-dollar investments from countries such as Saudi Arabia and Kuwait in mining, agriculture, IT and telecommunications sectors, including projects such as Reko Diq and an oil refinery, is expected to further increase foreign exchange supply. These developments are contributing to the rupee’s notable gains, with some currency dealers and politicians believing that the rupee has the potential to reach Rs 250/$ or even fall below Rs 200/$ in the long term.
Published in The Express Tribune, December 5u2023.
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