After four consecutive day fall the Pakistan Rupee (PKR) on Thursday recovered against the US Dollar. The recovery was attributed to an influx of export receipts and importers adopting a cautious approach in anticipation of the budget announcement.
Closing at PKR 286.01 on June 08, 2023, in the interbank foreign exchange market, the Rupee saw a gain of 7 paisas against the dollar, compared to the previous day’s closing rate of PKR 286.88.
According to the currency experts, the combined effects of increased export receipts and the cautious approach of importers paved the way for the PKR’s recovery, effectively putting an end to its recent losing streak.
Export receipts played a pivotal role in bolstering the PKR’s recovery. This upturn translated into an influx of foreign currency, fortifying the PKR and contributing to its renewed strength against the US Dollar.
READ MORE: Pakistani Rupee Extends Losses for Fourth Consecutive Session Against US Dollar
Furthermore, importers exhibited a cautious approach in light of the forthcoming budget announcement. Eager to assess the potential impact of the budget on their businesses, importers adopted a prudent stance, refraining from large-scale purchases or entering into significant import agreements. Consequently, this lowered the demand for foreign currency, allowing the PKR to find support and regain its foothold.
The central bank issued a statement indicating that Pakistan’s foreign exchange reserves decreased by $218 million, amounting to $9.513 billion by the week ending May 26, 2023. This decline follows the previous week’s reserves of $9.731 billion as of May 19, 2023. The continuous reduction in foreign exchange reserves is primarily due to the country’s ongoing external debt repayment obligations, highlighting the challenges Pakistan faces in maintaining a favorable balance of payments.
It is noteworthy that Pakistan’s foreign exchange reserves reached an all-time high of $27.228 billion by the week ending August 27, 2023. However, since then, the country has experienced a significant decline, with reserves decreasing by $17.715 billion.
In recent weeks, the Pakistani Rupee has faced significant pressure due to limited inflows and a challenging political climate. On May 11, 2023, the rupee hit a record low of PKR 298.93 against the US dollar, raising concerns among investors and eroding confidence in the local currency.
READ MORE: Rupee Experiences Third Consecutive Loss Against Dollar; Interbank Ends PKR 286.56
Exchange rates are influenced by various factors, including supply and demand dynamics, market sentiment, and economic indicators. The recent devaluation of the Pakistani Rupee against the US dollar reflects the prevailing economic conditions and underscores the urgent need for measures to stabilize the currency.
As the country’s central bank, the State Bank of Pakistan plays a crucial role in managing the exchange rate and implementing policies to foster stability. To restore confidence in the Pakistani Rupee, the government must address economic challenges, attract foreign investment, and improve the overall economic outlook through prudent economic policies and structural reforms.
Market participants, policymakers, and financial experts will closely monitor exchange rate movements to assess their potential impact on various sectors of the economy. By analyzing these fluctuations and developing strategies, efforts will be made to mitigate factors that contribute to volatility in the foreign exchange market.
While short-term fluctuations are common, sustaining stability and achieving long-term growth require addressing underlying economic issues. The commitment of the Pakistani government to implementing prudent economic policies and structural reforms will play a vital role in restoring confidence and strengthening the Pakistani Rupee in the long run.
READ MORE: Pakistani Rupee Eases by 51 Paisas to Dollar in Interbank on June 5, 2023
