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Rupee continues recovery against US dollar, trades below 300 in interbank

In the open market the dollar maintained its position at Rs300 today, according to data from ECAP

By Web Desk
September 12, 2023
A currency exchange dealer counting $100 bills. — AFP/File
A currency exchange dealer counting $100 bills. — AFP/File

The rupee continued its recovery against the US dollar as the greenback closed the day below the 300 mark in the interbank market on Tuesday.

As per the State Bank of Pakistan (SBP), the rupee closed at 299.89 against the dollar at the close of the day’s trading compared to Rs301.16 against the previous day’s closure. The rupee appreciated by 0.42% in the interbank market today.

This is the lowest the greenback has been against the rupee in the interbank market in the last 20 days.

On the other hand, in the open market the dollar maintained its position at Rs300 today, data from the Exchange Companies Association of Pakistan (ECAP) showed.

"The rupee has gained significantly in the open market in a week due to the government's action against the smuggling of the currency in big cities," said Arif Habib Limited (AHL) Head of Research Tahir Abbas had told a day earlier.

"This was a very important measure as our currency was continuously depreciating. It was also IMF's [International Monetary Fund] demand to maintain a difference between the rupee-dollar exchange rate at 1.25%," he added.

He said that further correction of up to Rs10-15 is expected in the coming days.

Pakistan announced a crackdown against illegal currency smugglers and hoarders following Chief of Army Staff (COAS) General Syed Asim Munir’s meeting with leading business figures in Lahore and Karachi. Gen Munir assured the business community of fostering “transparency” in the dollar exchange and interbank rates.

The rupee was poised to extend its recovery in the coming week, supported by administrative measures and robust dollar inflows from exports and remittances, The News reported citing dealers.

The sale of dollars by exporters and the return of remittances to the interbank market, spurred by the narrowing gap between the official banking market and the kerb market, helped boost the rupee’s strength.

“We have had exporters selling dollars at large scale. They were offloading dollars that’s why the rupee strengthened in the interbank market. We expect the rupee’s upward trend to continue in days ahead,” a trader at a leading commercial bank, who wished to remain anonymous, said.

At the start of September, the rupee in the kerb market plunged to 333.7 against the dollar, widening the spread between the two currency markets to almost 9%, as opposed to the 1.25% target set by the IMF.

The difference between the open market and interbank exchange rates has now shrunk to 1.3%.