Rupee gains for 10th straight session against dollar

KARACHI: The rupee continued to appreciate against the US dollar on Tuesday, supported by exporters’ sales of the greenback, increased remittances, and strict administrative measures to curb currency smuggling.

The rupee closed at 294.90 per dollar in the interbank market, up 0.36 percent from Monday’s close of 295.95. In the open market, where the currency is traded freely, the rupee gained one rupee to settle at 296 per dollar, according to the Forex Association of Pakistan.

“The rupee is gaining momentum due to higher inflows of dollars from exports and remittances, which have improved the supply and demand situation in the market,” a currency dealer said.

He said the government’s crackdown on currency smugglers, increased border security, and cancelation of the licenses of the exchange firms engaged in illicit forex activity have also helped the rupee stabilise.

Rates in the inter-bank and open markets are now firmly close to each other, reducing the premium that is one of the structural benchmarks of the International Monetary Fund (IMF) programme.

The government was asked that the average premium between the inter-bank and open market rate will be no more than 1.25 percent during any consecutive five business day period. Analysts said that the completion of the IMF review, which is expected in November 2023, will be a key driver for the local currency in the coming months.

The IMF has been urging Pakistan to adopt a more flexible exchange rate regime and reduce its reliance on central bank interventions.

Additionally, variables affecting the value of the rupee include global oil prices, USD inflows from multilateral agencies like the World Bank and Asian Development Banks, prompt rollover of expiring loans, and anticipated FDI in a select few sectors.

The rupee had been under pressure since the caretaker government took office on August 14, 2023, amid concerns that the non-political regime may allow the currency to adjust to market forces in line with the IMF’s recommendations.

As a result, the rupee depreciated by 10 percent (from Rs296 to Rs328) in the open market and by six percent (from Rs288 to Rs307) in the interbank market between August 14 and September 4, respectively.

However, since then, the rupee has recovered by 10 percent in the open market, going from Rs328 on September 4 to Rs2976 as of September 19. During this period, the rupee has appreciated by four percent in the interbank market, going from Rs307 to Rs294 per dollar.