Karachi, November 22, 2023 – The Pakistan Rupee (PKR) continued its rally for the fifth consecutive day against the US dollar, reaching PKR 285.13 on Wednesday.
This positive momentum has seen the local currency gain PKR 3.01 against the greenback over the past five days, starting from PKR 288.14 on November 15, 2023.
On a day-to-day (DoD) basis, the rupee saw a notable gain of PKR 0.66 from the previous day’s closing of PKR 285.79 against the dollar in the interbank foreign exchange market.
Currency analysts attribute this upward trend to the favorable response garnered by the International Monetary Fund (IMF) review and subsequent staff-level agreement. The positive sentiment resulting from this development has significantly bolstered investor confidence in Pakistan’s economy, leading to a resurgence in market inflows. Exporters, anticipating further rupee appreciation, have re-entered the market, contributing to improved supplies and an overall positive economic outlook.
A key driver of this optimism is the staff-level agreement reached during the first review under Pakistan’s stand-by arrangement with the IMF. While pending approval by the IMF’s executive board, this agreement is expected to inject approximately $700 million into Pakistan, bringing total disbursements under the stand-by arrangement to nearly $1.9 billion.
Government officials, including the caretaker prime minister, interim finance minister, and the governor of the State Bank of Pakistan, have expressed confidence in response to the staff-level agreement. However, reports have surfaced regarding market tactics aimed at depreciating the local currency. These tactics include the postponement of import payments, restrictions on new letters of credit issuance, and intensified oversight in market trading.
Despite these challenges, exporters have resumed selling forwards, with forward premiums experiencing a notable 30 percent decline. One- and three-month premiums closed the week at 190 and 430 paisa, respectively.
Market estimates now suggest that the Rupee is poised for further strengthening, potentially reaching around 282 against the US dollar. In anticipation of this, the State Bank of Pakistan is expected to resume its dollar buying, further supporting the currency’s upward trajectory. Positive developments, including multilateral lending and approvals from the IMF’s executive board, are anticipated to sustain the Rupee’s positive momentum.
As the Rupee continues its recovery, stakeholders and investors are closely monitoring developments in the forex market, gauging the impact of global economic factors and local policy measures on the currency’s performance. The positive outlook for the Rupee underscores the importance of economic stability and effective fiscal management in navigating the challenges of the global financial landscape.
