KARACHI: Pakistan’s national currency on Thursday continued its bullish trend and appreciated 1.38 percent against the United States dollar amid easing balance of payment pressure and expected inflows from the International Monetary Fund, traders and analysts said.
The Pakistani rupee gained Rs3.03 to close at Rs218.88 against the greenback in the interbank market following eight consecutive appreciation trading sessions. The rupee has recouped its value by 9.3% or Rs21 against the greenback in the continued uptrend, according to State Bank of Pakistan data.
“There are couple of reasons for the current appreciation of the Pak rupee against dollar including easing off balance of payment pressure and declining demand at home after government’s administrative measures to curtail imports,” Tahir Abbas, Director Research at Arif Habib Limited, told Arab News.
“Declining current account deficit and price cut of oil and other commodities also eased off pressure on the rupee. The expected inflows from the IMF by the end of this month and undervalued currency are also the key reasons of rupee appreciation.”
Following austerity measures by the government and a restriction on imports, the import bill has declined from $7.8 billion in June 2022 to $4.8 billion in July 2022, which has not only reduced the trade deficit but also eased pressure on the national currency.
The rupee in the open market also appreciated from Rs218 to Rs216 for selling during trading on Thursday. The currency in the open market has appreciated by over 11% or Rs28 since July 29, 2022, according to the Exchange Companies Association of Pakistan (ECAP).
“There are only sellers in the market after the sentiments have changed following the measures taken by government and the central bank,” Zafar Paracha, General Secretary of ECAP told Arab News.
“The central bank has taken action against the banks’ treasuries departments which were involved in maneuvering of dollar in interbank market. In addition, the expected reduction in the import bill of August has also played appreciation role.”
The pressure on the Pakistani rupee eased off after the government took steps to curtail imports and meet preconditions of the IMF for the revival of a $6 billion program signed in 2019 to stave off a balance of payment crisis.
The IMF said last month it had reached a staff level agreement with Pakistan that would pave the way for the disbursement of $1.17 billion after its board approval later this month. Islamabad also has to convince the fund about the availability of funds for a $4 billion financing gap.
Last week, the UAE’s state news agency had reported that the country intended to invest $1 billion in Pakistani companies across various sectors, which include gas, energy infrastructure, renewable energy and healthcare.
Following the current bullish trend in the currency market, Pakistani analysts said the currency was likely to appreciate further to around Rs200 against the greenback in the near future.
Stocks, however, on Thursday, remained bearish mainly due to profit taking that kicked off during the midsession. The benchmark KSE-100 index closed at 42,243 points, down by 251 points.
“Stocks fell sharply lower on political noise and hike in power tariff. Mid session support remained on strong rupee and falling Pakistan dollar bond yields,” Ahsan Mehanti, CEO of Arif Habib Corporation, told Arab News. “Investor concerns for weak earnings outlook played a catalyst role in bearish close.”