Rupee rises on IMF deal hopes

The rupee strengthened 1.08 percent against the dollar on Wednesday on hopes of a breakthrough in the country's financial crisis as talks between government and IMF made progress toward a tangible bailout loan deal.

The rupee ended at 273.33 per dollar in the interbank market, stronger than Tuesday’s close of 276.28.

The IMF mission, currently in Pakistan to review the next tranche of loans worth $1 billion, is likely to conclude technical level talks on February 9. Though policy-level discussions have not yet started.

Analysts said the market has responded favourably on optimism that the government would reach an initial deal with the IMF by Thursday.

“Amid hope that Pakistan may get green signal for ninth review from IMF staff...some stability is being witnessed in rupee,” said Mohammed Sohail, the CEO of Topline Securities.

Dealers said exporters are also selling their dollars as "they think the rupee is appropriately valued".

"The inflows from illegal markets are also shifting to formal channels as a result of the free-floating exchange rate."

The local unit gained 1 rupee to settle at 279 per dollar in the open market.

“As the supply of dollars has increased while the demand has declined, the rupee is recovering," said Muhammad Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan.

"In anticipation of the rupee's value continuing to rise in the days to come, people are visiting exchange companies to sell their dollars.”

“The pressure on the rupee has decreased to some extent due to the decrease in the smuggling of US currency into Afghanistan,” Paracha added.

Paracha, however, said some traders and smugglers are still daily trading as much as $5 million into Afghanistan illegally.