Karachi, December 4, 2023 – The Pakistani Rupee (PKR) has marked the commencement of the week with a notable appreciation, strengthening by PKR 0.44 against the US Dollar in Monday’s trading.
Closing at PKR 284.53 to the dollar, the rupee exhibited a positive trend compared to last Friday’s closing rate of PKR 284.97 in the interbank foreign exchange market.
Market analysts attribute this upward movement to the prevailing optimism surrounding the anticipation of the International Monetary Fund’s (IMF) approval of the next $700 million tranche under its $3 billion Extended Fund Facility (EFF) arrangement.
The approval of this tranche is seen as a pivotal factor influencing the current positive sentiment in Pakistan’s currency market. Analysts suggest that this financial injection will further stabilize the economic landscape and contribute to the resilience of the rupee against the dollar.
Despite the modest appreciation, the recent rally in the rupee is considered a result of a confluence of positive economic indicators and significant events. Notably, Pakistan’s foreign exchange reserves have demonstrated improvement, with the State Bank of Pakistan’s (SBP) reserves witnessing a rise of $77 million, reaching $7.257 billion by the week ending November 24. Overall reserves, including those held by commercial banks, also increased by $91 million to $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 vital role in fostering positive market sentiment. This extension is viewed as crucial in sustaining Pakistan’s foreign exchange reserves and addressing challenges in the external account.
Looking ahead, market expectations are high for the IMF board to greenlight the second tranche of $700 million on Thursday. While the amount may seem moderate, it carries the potential to impact the US Dollar to Pakistani Rupee (USDPKR) exchange rate, possibly pushing it into the 280-282 range.
At this level, the Central Bank is anticipated to engage in dollar purchases as a strategic move to reinforce its reserves and ensure stability in the foreign exchange market. The outcome of this decision will likely shape the trajectory of the rupee’s performance in the coming weeks.