Rupee strengthens

The rupee ended higher on Tuesday amid slowdown in the dollar demand from importers, dealers said. It closed at 156.80 against the greenback, compared with the previous closing of 156.90 in the interbank market.

In the open market, the rupee also managed to gain 20 paisas against the dollar. It settled at 156.80 versus the dollar, compared with 157 in Monday’s trade.

Forex dealers said the currency recovered from record lows set during the last two weeks aided by soft dollar demand and the central bank’s clarity on the exchange rate policy. The State Bank also announced that it had completed all prior actions of the International Monetary Fund’s Extended Fund Facility. This also sent positive signals to the market participants.

State Bank of Pakistan Governor Dr Reza Baqir, in a news conference on Monday, said that a market-based system is implemented in Pakistan, which protects exchange rate from manipulation and simultaneously follows demand-supply mechanism.

To fix exchange rate regime, Pakistan’s external situation (current account deficit) started deteriorating and reserves were falling. After recent depreciation, the country has seen substantial decline in the current account deficit, he said.

Neither fixed not free float regime of exchange rate is good for Pakistan, as former can lead to external imbalance and latter can lead to manipulation.