KARACHI: The Pakistan Rupee (PKR) continued to make recovery for the fourth straight day against the dollar on Wednesday since sharp enhancement in policy rate to 12.25 per cent.
The rupee ended Rs181.82 to the dollar from previous day’s closing of Rs182.02 in the interbank foreign exchange market.
READ MORE: Rupee makes recovery to dollar for third straight day
The rupee fell to all-time low at Rs188.18 to the dollar on April 07, 2022. On the same day the State Bank of Pakistan (SBP) announced a massive raise in interest rate by 250 basis points to 12.25 per cent from 9.75 per cent.
Prior to the policy rate increase the dollar was unabated for over a two week and rupee fell continuously.
READ MORE: Rupee recovers sharply; dollar eases to Rs182.93
The rupee recovered around Rs6.36 against the dollar since the increase in the policy rate. The local currency recorded all-time low of Rs188.18 to the dollar on April 07, 2022.
The SBP noted that the recent developments necessitated a strong and proactive policy response.
Accordingly, the Monetary Policy Committee (MPC) decided at its emergency meeting today, to raise the policy rate by 250 basis points to 12.25 percent.
READ MORE: Rupee rebounds sharply on massive interest rate hike
This increases forward-looking real interest rates (defined as the policy rate less expected inflation) to mildly positive territory. The MPC was of the view that this action would help to safeguard external and price stability.
The MPC also noted that SBP is in the process of taking further actions to reduce pressures on inflation and the current account, namely an increase in the interest rate on the export refinance scheme (EFS) and widening the set of import items subject to cash margin requirements. These items are mostly finished goods including luxury items and exclude raw materials.
The announcement of these measures is expected soon and will complement the action taken by the MPC on interest rates.
