KARACHI: The Pakistani Rupee gained 37 paisas against the US dollar on Friday, closing at Rs159.09 from the previous day’s rate of Rs159.46 in the interbank foreign exchange market. This appreciation was attributed to lower imports and higher inflows of export receipts and workers’ remittances, according to currency dealers.
Dealers noted that importers were cautious due to concerns over the rising number of coronavirus cases both domestically and globally. The uncertainty surrounding the pandemic has led to a decline in import activities, contributing to the strengthening of the local currency.
On the export front, positive sentiments prevailed as recent data from the Pakistan Bureau of Statistics (PBS) showed a notable improvement. Exports during October 2020 increased by 3.07 percent to $2.08 billion, up from $2.02 billion in the same month of the previous year. This increase reflects a gradual recovery in demand for Pakistani goods in the international market, especially as global trade starts to rebound from the COVID-19 induced slowdown.
Conversely, imports for October 2020 declined by 5.73 percent, falling to $3.82 billion from $4.05 billion in October 2019. This reduction in imports is a positive sign for the country’s balance of payments, as it indicates a lower outflow of foreign exchange for the purchase of goods and services from abroad.
As a result of these dynamics, the trade deficit narrowed significantly. The trade deficit for October 2020 reduced by 14.46 percent to $1.74 billion, down from $2.03 billion in the corresponding month of the previous year. This decline in the trade deficit is a welcome development, as it reduces the pressure on the country’s foreign exchange reserves and supports the rupee.
The rupee’s recent performance marks a recovery from its historic low of Rs168 against the dollar, which it reached on August 26, 2020. The currency had come under severe pressure earlier in the year due to economic uncertainties triggered by the pandemic and a sharp decline in exports and remittances. However, improved export numbers, coupled with a recovery in remittances, have provided some support to the local currency in recent weeks.
Looking ahead, market participants remain cautious but hopeful. The continuation of positive trends in exports and remittances, along with stable import levels, could help sustain the rupee’s strength against the dollar. However, much will depend on the evolving situation of the COVID-19 pandemic and its impact on both the local and global economy.
