Monday October 02, 2023

Rupee extends rally against dollar

By Our Correspondent
May 16, 2023

KARACHI: The rupee continued an uptrend against the dollar on Monday, supported by the central bank’s rigorous monitory to avert currency manipulation.

In the interbank market, the local unit closed at 284.97 per dollar, compared with Friday’s close of 285.08. However, the investors were seen reluctant to build positions owing the evolving political situation in the country. “The continued political upheaval discouraged investors from taking new positions,” said a currency dealer.

The political drama that began with the arrest of the former prime minister Imran Khan subsided after his release, but a sit-in outside the Supreme Court by the ruling Pakistan Democratic Movement against the judiciary for giving Khan a broad reprieve had raised political temperate in the country again, he added.

The political volatility took the rupee to a record low of 299 against the dollar last Thursday. However, it saw a sharp recovery to close at 285.05 later on Friday. While political instability and poor sentiment were the main causes of the rupee's volatility, they can also be blamed for April's lower-than-anticipated remittance numbers, dwindling foreign exchange reserves, and uncertainty surrounding the IMF programme.

The State Bank of Pakistan's surveillance to prevent currency rate manipulation, according to Zafar Paracha, secretary general of the Exchange Companies Association of Pakistan, is what keeps the rupee stable. “If there is no unusual demand for dollars from importers, the rupee shouldn't fall significantly,” he said.

Due to a lack of dollars, the rupee declined in the open market. The currency declined 3 rupees to settle at 292 per dollar. “Banks aren't providing foreign currency to the exchange companies, which has led to a lack of dollars in the market,” Paracha said.

Analysts said traders would keep an eye on the political situation and developments related to the International Monetary Front to gauge the future direction of the rupee.

“Rupee is back on levels, where it has been largely stable recently. The market will continue to closely monitor development on IMF and political front,” said Fahad Rauf, head of research at Ismail Iqbal Securities.