Karachi, December 5, 2023 – The Pakistani Rupee (PKR) exhibited a positive trend on Tuesday, recording a gain of PKR 0.15 against the US dollar at the close of the interbank foreign exchange market.
The exchange rate concluded at PKR 284.38 to the dollar, showing an improvement from the previous day’s closing rate of PKR 284.53.
Market observers attribute this upward movement to the prevailing optimism surrounding the potential approval of the next $700 million tranche by the International Monetary Fund (IMF) under its $3 billion Extended Fund Facility (EFF) arrangement. The approval of this tranche is considered a crucial factor influencing the current positive sentiment in Pakistan’s currency market. Analysts believe that this financial injection will contribute to the stability of the economic landscape and bolster the resilience of the rupee against the US dollar.
Despite the modest appreciation, the recent strengthening of the rupee is seen as a result of various positive economic indicators and significant events. Notably, Pakistan’s foreign exchange reserves have shown improvement, with the State Bank of Pakistan’s (SBP) reserves increasing by $77 million, reaching $7.257 billion by the week ending November 24. The overall reserves, including those held by commercial banks, also witnessed a rise of $91 million, reaching $12.393 billion.
The extension of Saudi Arabia’s $3 billion deposit with the SBP for an additional year, set to mature on December 5, has played a pivotal role in fostering positive market sentiment. This extension is deemed crucial in maintaining Pakistan’s foreign exchange reserves and addressing challenges in the external account.
Looking ahead, market expectations are high for the IMF board to approve the second tranche of $700 million on Thursday. Although the amount may seem moderate, it holds the potential to impact the US Dollar to Pakistani Rupee (USDPKR) exchange rate, potentially pushing it into the 280-282 range.
At this level, the Central Bank is anticipated to engage in strategic dollar purchases to reinforce its reserves and ensure stability in the foreign exchange market. The outcome of this decision is expected to shape the trajectory of the rupee’s performance in the coming weeks, with investors and analysts closely monitoring developments for further insights into the currency’s future direction.
