KARACHI: The rupee strengthened for the fifth straight session on Wednesday, rising 0.23 percent against the dollar in the interbank market, as optimism over Pakistan's economic outlook boosted the local currency.
The rupee closed at 285.13 to the dollar, compared with 285.79 on Tuesday, according to the State Bank of Pakistan. In the open market, the rupee also appreciated by 25 paisas against the greenback.
The Exchange Companies Association of Pakistan (ECAP) reported that the rupee was trading at 286.50 to the dollar, up from 287.25 in the previous session.
Dealers said the rupee's rally was driven by positive sentiment following the agreement between Pakistan and the International Monetary Fund (IMF) on the release of the next tranche of $700 million under the current loan programme.
The IMF's endorsement of Pakistan's economic performance and reforms also encouraged exporters to sell their dollar holdings, creating a surplus of the US currency in the market. Zafar Paracha, general secretary of the ECAP, said the exchange companies had sold between $150 and $160 million to banks this month, and expected to sell more in the coming days.
He said the inflows of dollars from remittances, foreign direct investment and other sources had improved the supply situation in the open market, while the demand from importers remained subdued.
Exporters, who previously held dollars, are regularly selling them, Paracha said, hoping that the rupee will appreciate in the upcoming days as planned financing from bilateral and other multilateral partners is expected to arrive in Pakistan in addition to the IMF upcoming disbursement. “Importers' demand for the dollars has been quite low. They don't buy in advance; they just purchase cash according to their needs.”