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Thursday June 30, 2022

Rupee sees massive recovery against US dollar in interbank market

As per the State Bank of Pakistan, the US dollar closed at Rs207.23 in the interbank market

By Web Desk
June 23, 2022
A currency dealer is seen counting $100 notes; while Rs500 notes are kept on the table. — AFP/File
A currency dealer is seen counting $100 notes; while Rs500 notes are kept on the table. — AFP/File

KARACHI: The Pakistani rupee finally snapped its nine-day long losing streak against the US dollar on Thursday, gaining Rs4.7 in the interbank market, a day after Finance Minister Miftah Ismail announced a $2.3 billion loan agreement with a Chinese banks consortium.

As per the State Bank of Pakistan, the US dollar closed at Rs207.23 in the interbank market. The previous day's close was Rs211.93 against the greenback, according to the State Bank of Pakistan (SBP).

After losing 5.39% in the last nine sessions, the Pakistani rupee recovered 2.27% day-on-day against the US dollar.

The appreciation was in line with the expectations of market analysts who foresaw that the rupee would see a correction today as it was trading at 208-209.50 against the dollar in the TOM (one-day forward) market.

Since the beginning of this fiscal year (July 1, 2021) to date, the rupee has collectively dropped by a massive 31.54% (or Rs49.69) compared to the previous fiscal year’s close at Rs157.54.

The rupee has maintained a downward trend for the last 13 months. It has lost 36.09% (or Rs54.96) to date, compared to the record high of Rs152.27 recorded in May 2021.

Analysts said that the outlook for the currency is expected to be bullish in sessions ahead given the bright chances of the revival of the International Monetary Fund (IMF) programme, dollar inflows contingent on the IMF into Pakistan, the expected launch of Sukuk by the government, and a fall in the international crude oil prices.

In his comments, Pakistan-Kuwait Investment Company Head of Research Samiullah Tariq said: “I think the rupee-dollar parity should improve as the IMF deal along with the Chinese deposit should improve sentiment in the currency market.”

Pakistan and the IMF achieved progress in striking a consensus on the budget measures for the fiscal year 2022-23 and the latter will share a draft memorandum of economic and financial policies (MEFP) very soon. The government is also expecting the multilateral lender to increase the size and duration of the $6 billion Extended Fund Facility.

The country is also likely to receive inflows from China within a few days after Pakistan signed an RMB 15 billion ($2.3 billion) loan facility agreement with a Chinese consortium of banks, as announced by finance minister Miftah Ismail on his official Twitter handle a day earlier.

The expected inflows will help bolster foreign currency reserves and the rupee. However, in case of a delay in the revival of the IMF programme or other negative cues on the economic front, the rupee’s advance might be short-lived.

Short-term flows aside, it is difficult to see the rupee sustaining its pullback for long until Pakistan inks the staff-level agreement with the IMF.

Meanwhile, the Pakistan Stock Exchange (PSX) also resumed it uptrend on positive economic cues and was trading at 42,916.67 points at 12:49pm with an increase of 458.53 points, or 1.08%.