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Wednesday February 28, 2024

Rupee reaches seven-week high on dollar sales, crackdown

By Our Correspondent
September 27, 2023

KARACHI: The rupee rose to its highest level in seven weeks on Tuesday, boosted by dollar sales from exporters and tough measures against illegal currency dealers, hoarders, and smugglers of dollars.

In the interbank market, the rupee closed at 289.80 to the dollar, its strongest since August 11. It ended at 290.86 in the previous session, gaining 0.37 percent day-on-day. It closed higher for a 14th straight session. Dealers reported that exporters are frequently coming forward to sell dollars. People who were preventing inflows are now bringing cash to the spot market, and some are making bulk sales in the forward market.

The currency is expected to appreciate further as a result of tough measures against informal funds transfer and transit from Afghanistan. Some analysts expect the rupee to strengthen to 278-280 per dollar in the coming days. Since September 5, when it plunged to a record low of 305, the local currency has increased by 17 rupees, or 5.6 percent, against the dollar. "In the short run, we may see rupee strengthen due to ongoing measures taken by the regulators. However, in the medium term, it all depends on economic fundamentals, especially forex reserves, and how the IMF Loan Review in November goes," said Mohammed Sohail, the CEO of Topline Securities.

In the week ending September 15, the forex reserves held by the State Bank of Pakistan rose by $56 million to $7.7 billion. The IMF's review of the stand-by arrangement is scheduled for November, and the government expects to receive the loan programme's second tranche by December.

A crackdown on the grey market and increased incentives for remitters are likely to improve remittances in the months to come. This will keep forex liquidity available in the market together with higher exports. While some of the import backlogs have been cleared, the remainder will maintain demand for dollars strong, according to another analyst.

In the open market, the currency increased by 2 rupees against the dollar. According to the Exchange Companies Association of Pakistan, the rupee was trading at 291 per dollar for selling, up from 293 in the previous session. Since the beginning of September, when it dropped to 335, the rupee has appreciated by Rs44, or 13 percent, against the dollar in the kerb market.