Rupee hits 3-month high level of 158.1 on foreign inflows

KARACHI: Pakistani rupee hit more than three-month high of 158.1 against the US dollar in the interbank trade on Friday as recent bouts of foreign inflows strengthened the local currency.

The level has not been seen since November 13 last year. The rupee value, however, went slightly up 0.2 percent compared to the Thursday’s close of 158.46 per dollar.

Analysts said the rupee appreciation is a logical outcome of foreign inflows in shape of remittances and loans.

“Today, supplies were higher than the demand. Moreover, persistent inflows in Roshan digital accounts propped up the rupee’s value against the dollar,” said a foreign exchange dealer at a commercial bank.

“Expectations of more dollar inflows in Roshan digital accounts, and the expected release of around $500 million from the IMF [International Monetary Fund] after the completion of the pending reviews under the extended fund facility supported sentiment for the rupee,” added the dealer.

The rupee closed at 158.4 versus dollar in the open market, compared with 158.6 a day ago.

Roshan digital accounts are digital bank accounts for non-resident Pakistanis or locals with declared foreign assets to make investments or meet various expenditures in Pakistan.

Total 92,500 accounts have received $554 million inflows in five months since the launch. The accounts belong to people from 97 countries.

“Rupee appreciation was led by better than expected Roshan digital flows, low demand for physical dollars due to reduction in smuggling,” said Muzammil Aslam, chief executive officer of Tangent Capital.

The rupee is expected to get further below the current level in days to come, according to the analysts.

“A sustainable level for the next month looks to be 157 to 157.5 despite some debt repayments are scheduled in March,” said another dealer.

Analysts also attributed the rebound in rupee value to a three-month breather given by the global financial system watchdog Financial Action Task Force to Pakistan to comply with all the regulations related to anti-money laundering and combating the financing of terrorism.

The rupee has so far increased 0.6 percent against the dollar during the week.

Remittances from overseas Pakistani workers rose 24 percent to $16.5 billion in seven months of this fiscal year. Remittances have the potential to increase in the coming years, supported by the Pakistan Remittances Initiative and technical advances that materially reduce transaction costs, particularly for remittances through electronic and official channels, said Moody’s Investor Services in its latest report.

The current account deficit narrowed 55 percent year-on-year to $229 million in January. The current account recorded a surplus of $912 million in the seven months of the current fiscal year compared with the deficit of $2.5 billion in the same period a year earlier.