Rupee rallies for 13th day as dollar supply improves

By Our Correspondent
September 23, 2023

KARACHI: The rupee strengthened for a 13th straight session on Friday, driven by improved dollar liquidity and positive sentiments about the country’s economy.

The rupee rose 0.35 percent or 1.02 rupees to close at 291.76 per dollar in the interbank market, its highest level since Sept. 5, when it hit an all-time low of 307.10. The currency has gained 5 percent or Rs15 since then, supported by dollar inflows from exporters and remittances, as well as measures by the central bank to encourage legal channels for foreign exchange transactions.

“Due to exporters selling dollars and an improvement in remittance inflows, there are sufficient dollars available to meet demand from importers and firms,” said a currency dealer. “The State Bank of Pakistan issued cash incentives for banks in an effort to encourage remittances through legal channels, and these measures helped to bolster the rupee's sentiment. The central bank's foreign exchange reserves also marginally grew,” the dealer added. The forex reserves held by the SBP increased by $56 million to $7.7 billion in the week ending September 15.

The optimistic perceptions of the country’s economy also contributed to the rupee's gains against the dollar. “Despite the challenges posed by higher oil prices, there is optimism regarding a potential easing of inflation in the coming months. Several factors contribute to this positive outlook, including currency stability, improved reserves, crackdowns on smuggling, and a reduction in the prices of essential commodities like wheat and sugar,” said Chase Securities in a note.

The Election Commission's recent announcement stating that the elections are scheduled for the last week of January 2024 has quelled concerns of an indefinite delay. This development has injected a sense of relief into investors, leading to a surge in positive sentiment, it added.

The local currency rose 2.50 rupees against the dollar in the open market. According to the Exchange Companies Association of Pakistan (ECAP), the selling rate for the rupee against the dollar was 293.50, up from 296 in the previous session.

The improvement in the supply of dollars in the market, according to ECAP Secretary General Zafar Paracha, has been the primary driver of the rupee's ongoing surge. “Dollars are not in high demand in the open market. The buyers of US dollars are not coming, and the exchange companies only have sellers,” Paracha said. “The campaign against black marketers, currency hoarders, and illegal dollar trade appeared to be having some success. The grey market is practically extinct,” he added.