Rupee surges to two-week high as exporters unload dollars

KARACHI: The rupee strengthened to its highest level in more than two weeks on Monday, boosted by increased dollar supplies from exporters who sold the greenback in anticipation of further appreciation of the local currency, dealers said.

The rupee closed at 301.16 per dollar in the interbank market, up 1.79 rupees or 0.59 percent from Friday’s close of 302.95. It was the strongest level since Aug. 25, when it traded at 300.50.

The currency has gained 2 percent or 5.9 rupees against the dollar in the last four trading sessions, supported by administrative measures taken by the government to curb currency smuggling and hoarding.

The rupee also rose by 4 rupees to 300 per dollar in the open market, where inflows from the grey market have increased as the government cracked down on illegal currency dealers.

“Exporters are arriving in large numbers to realise their proceeds or discount against future receivables,” said a dealer at a major bank.

“Supplies in the foreign exchange market were supported by exporters selling dollars in expectation of a further increase in the value of the rupee. Remittance inflows are still meager, nevertheless.”

Dealers said the supply of dollars has increased as inflows are flowing into the kerb market from the grey market. “There are currently no customers for dollars in the black market because of the government’s crackdown on currency smugglers and hoarders,” another dealer said.

“In the coming sessions, we expect the rupee to rise further and touch 300 against the dollar.” The government’s actions to stabilise the currency started with a meeting between the army chief and businessmen last week, where he assured them of fixing the economy.

The measures included acknowledging smuggling as a major problem on the west borders, stiff measures on money changers, fast tracking of Special Investment Facilitation Council initiative, crackdown on dollar smuggling and black marketers, and enhanced supervision in the forex market.

The finance minister also said that the International Monetary Fund review was scheduled in November, and expected the second tranche to be released by December.

The State Bank of Pakistan (SBP) also announced structural reforms for exchange businesses, leading to their consolidation and transformation into a single category with a clearly defined mandate.

The SBP cited “frequent regulatory issues and weaknesses in the exchange companies’ sector” as justification for this action. The minimum capital requirement for exchange businesses has also been raised by the SBP from Rs200 million to Rs500 million, and it must be met by Dec. 31, 2023.