Karachi, October 29, 2024 — The Pakistani rupee slightly depreciated against the U.S. dollar on Tuesday, closing at PKR 277.74 in the interbank market, a drop of 6 paisas from the previous day’s close of PKR 277.68.
This minor dip reflects ongoing fluctuations as Pakistan’s foreign exchange dynamics continue to shift, shaped by market demand and evolving fiscal trends.
Currency analysts attribute the rupee’s softening to increased demand for the dollar, primarily driven by import requirements and corporate financial commitments. As local entities prepare for various international transactions, the demand for foreign currency rises, exerting pressure on the rupee. However, despite these immediate pressures, experts remain cautiously optimistic regarding the currency’s medium-term stability. According to analysts, improved foreign exchange inflows could offer support to the rupee in the near future.
An important development providing some stability is the modest increase in the State Bank of Pakistan’s (SBP) foreign reserves. As of October 18, 2024, the SBP reported a gain of $18 million, bringing total reserves to $11.014 billion. Though modest, this increase provides a crucial buffer amid a volatile economic landscape. Analysts emphasize that this steady growth in reserves is pivotal in cushioning Pakistan’s economy against external payment pressures, stabilizing the rupee amidst unpredictable fluctuations in the interbank market.
Moreover, broader indicators of Pakistan’s economic health suggest potential resilience. Recent improvements in Pakistan’s trade balance and current account deficit indicate a downward trend in demand for foreign currency. With a healthier current account and narrower trade deficit, the country is less pressured to obtain foreign exchange, an encouraging signal for rupee stability. Such fiscal strengthening supports investor confidence, enhancing the rupee’s position in the currency markets.
Complementing these economic improvements are steady inflows of remittances from the Pakistani diaspora and an uptick in export revenues. Remittances play an integral role in Pakistan’s economic stability, providing a consistent source of foreign exchange and buoying market confidence. Additionally, rising export revenues add to the country’s foreign exchange pool, lending further support to the rupee’s valuation.
The outlook for the rupee remains cautiously positive. While immediate pressures from corporate and import-driven dollar demand may cause occasional dips, sustained remittance inflows, improving fiscal metrics, and an uptrend in exports collectively contribute to an environment conducive to rupee stabilization. If these trends persist, analysts believe the rupee could gain further traction, holding steadier in the face of global economic uncertainties.