Thursday February 22, 2024

Dollar continues downward spiral unabated as market pins hope on Dar

PKR appreciates 3.02 against US dollar and was trading at Rs234 in interbank market

By Web Desk
September 27, 2022
A foreign currency dealer counts US dollars at a shop in Karachi, Pakistan, May 19, 2022. — AFP/Fil
A foreign currency dealer counts US dollars at a shop in Karachi, Pakistan, May 19, 2022. — AFP/Fil

KARACHI: The rupee continued its winning streak against the dollar for the third consecutive trading session on Tuesday in the interbank market as the market pinned hope on PML-N leader Ishaq Dar — slated to be Pakistan’s new finance minister.

The dollar lost Rs3.11 against the rupee today and closed at Rs233.91 in the interbank market at the end of the trade session. The greenback has so far shed Rs5.74 in the interbank market during the past two trading sessions.

 Due to the recent decline in the value of the greenback, Pakistan’s total debt was reduced by Rs740 billion.

The rupee came close to reaching a record low of 240 against the dollar but was unable to do so after several positive cues despite deadly floods devastating Pakistan's economy.

Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha said it seems like the market is responding to PML-N leader Ishaq Dar's arrival and the announcement of him replacing Miftah Ismail as the finance minister.

Market pins hope on Ishaq Dar

Currency dealers said that the investors turned optimistic about the outlook for the rupee and the currency on the news of Ishaq Dar’s return to Pakistan.

“Dar optimism helped exporters to sell the greenback in the market, leading to the rise in the rupee,” said a dealer.

Fahad Rauf, the head of research at Ismail Iqbal Securities attributed a fresh appreciation in the rupee to the sudden improvement in the market sentiment as people have memories of a stable rupee during the last Dar era.

“The dollar is crushing global currencies, while our foreign exchange reserve position is far from comfortable. Thus, any sustainable rally in the rupee does not seem likely in the current scenario. The situation in global and Pakistan’s economy is not isolated, thus change of finance ministers would not do any magic,” Rauf added.

“We need to keep taking tough economic measures to stabilise the economy,” Rauf suggested.

The expectations of dollar inflows from international lending institutions to support Pakistan’s relief and reconstruction efforts in the wake of the catastrophic floods that have hit the country and the decline in oil prices also helped to prevent the rupee from hitting a record low during the last week.

“Few developments over the weekend are helping stocks and PKR. Falling global oil prices, more pledges from international donors for floods and perception that Dar may be able to control economic issues,” said Mohammed Sohail, CEO at Topline Securities.

Analysts and the markets are looking at how Dar will step into the eye of the storm roiling Pakistan’s economy as he is the chief defender of keeping the overvalued currency.

“Managing inflation and the rupee would be the biggest challenges for the new finance minister, including negotiating any debt relief with the IMF and other multilateral creditors,” said Mustafa Mustansir, the head of research at Taurus Securities.