KARACHI: The Pakistan Rupee (PKR) has stunned global financial markets with an astonishing recovery, solidifying its position as the best-performing currency in the world for the month of September, according to market analysts.
After plummeting to historic lows earlier this month, the PKR has made a remarkable comeback, gaining a staggering 6.3 percent against the US dollar in September. This impressive surge is attributed to several factors, including a crackdown on illegal currency dealers, increased dollar inflows from exporters and remittances, and growing expectations of external financing from friendly nations and multilateral organizations.
READ MORE: Pakistani Rupee Ends September on Winning Streak, Closes at PKR 287.74 Against Dollar
On Thursday, the rupee closed at 287.74 per dollar, reaching its highest level since August 10, a significant rebound from its all-time low of 307 on September 5, when it was plagued by political uncertainty and a widening current account deficit.
The PKR’s resurgence during September 2023, appreciating by 6.2 percent against the dollar, has been confirmed by Arif Habib Limited, a prominent financial institution.
In contrast to many of its Asian counterparts, which experienced declines against the US dollar due to the US Federal Reserve’s announcement of prolonged high interest rates, the PKR has stood out as a shining star in the region. Currencies such as the Thai baht and the South Korean won depreciated by more than 2 percent each.
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Several factors contributed to the rupee’s remarkable recovery. The crackdown on the informal gray market, where dollars were being traded at a premium over the official rate, played a pivotal role. Additionally, the State Bank of Pakistan canceled the licenses of several exchange companies involved in illegal forex transactions. Meanwhile, exporters opted to sell their dollar proceeds in the interbank market, and currency hoarders unwound their positions amid concerns of further regulatory actions.
Analysts also attributed the PKR’s strength to the anticipation of external financial support from friendly nations like China and Saudi Arabia, as well as from multilateral lenders such as the International Monetary Fund (IMF) and the Asian Development Bank (ADB).
READ MORE: PKR Makes Record 5.6% Gain Against US Dollar in Unprecedented Winning Streak
While the PKR’s resurgence is impressive, Fahad Rauf, the head of research at Ismail Iqbal Securities, offered a note of caution. He pointed out that the rupee’s appreciation might not be sustainable in the long run, given the country’s weak economic fundamentals. He highlighted that Pakistan’s foreign exchange reserves are still far from comfortable, standing at $7.63 billion as of September 2022, which is barely enough to cover two months of imports. Pakistan’s currency has faced significant challenges in recent years, Rauf noted.
Although the recent performance of the PKR is encouraging, it is primarily the result of administrative measures. The reserves situation still presents concerns. On Thursday, the rupee also strengthened in the open market, trading at 288 per dollar for selling, up from 290 on Wednesday, according to the Exchange Companies Association of Pakistan.
READ MORE: Pakistani Rupee Continues Winning Streak, Ending at PKR 290.86 Against Dollar
Market experts are closely monitoring the situation, and the future of the PKR will depend on a combination of economic policies, external financing, and continued efforts to stabilize the currency’s value in the global market.
