The Pakistani Rupee (PKR) displayed resilience on Friday, registering a modest gain of three paisas against the US dollar in the interbank foreign exchange market. The exchange rate closed at PKR 221.92 to the dollar, compared to the previous day’s closing of PKR 221.95.
The day began with heightened demand for the dollar amidst political turmoil triggered by an attack on former Prime Minister Imran Khan. However, market sentiments took a positive turn following reports that the State Bank of Pakistan (SBP) had granted permission to exchange companies to retain 20 percent of workers’ remittances. This development alleviated pressure on the rupee and contributed to its upward trajectory.
Moreover, recent data revealed an improvement in the country’s foreign exchange reserves position, further bolstering investor confidence. Pakistan’s foreign exchange reserves surged by $1.527 billion to reach $14.69 billion by the week ending October 28, 2022, following the transfer of funds from the Asian Development Bank (ADB). This uptick marked a significant increase from the previous week’s reserves of $13.162 billion, recorded on October 21, 2022.
It is noteworthy that Pakistan’s foreign exchange reserves had peaked at an all-time high of $27.228 billion on August 27, 2021. However, since then, reserves have experienced a decline of $12.539 billion. Nevertheless, the latest surge indicates a positive trend in the country’s reserve accumulation efforts.
Furthermore, the official foreign exchange reserves held by the State Bank also witnessed a notable increase, rising by $1.473 billion to reach $8.913 billion by the week ending October 28, 2022, compared to $7.44 billion recorded a week earlier.
Currency experts attribute the global appreciation of the US dollar to a sharp rise in treasury yields, triggered by the Federal Reserve’s indication of potential interest rate hikes. The Federal Reserve recently announced a 75 basis points increase in its benchmark funds rate, bringing it to 3.75-4 percent, in line with market expectations.
The combination of political stability concerns and global economic dynamics has kept currency markets on edge, with investors closely monitoring developments for potential implications on exchange rates and economic stability.
The Pakistani Rupee’s modest gain against the US dollar, coupled with improvements in foreign exchange reserves and regulatory measures by the State Bank, signals positive momentum in the country’s currency markets. However, continued vigilance and prudent policy measures will be essential to navigate ongoing challenges and maintain stability in Pakistan’s financial landscape.