Sunday February 05, 2023

Rupee posts recovery on suspected SBP intervention

April 23, 2022

KARACHI: The rupee recovered on Friday to rise on suspected intervention by the central bank after falling to 188 per dollar in early trade, dealers said.

The rupee ended at 186.70 to dollar and 0.14 percent stronger than Thursday’s close of 187.50, after falling to a session low of 188. It gained 50 paisas to close at 187.50 per dollar in the open market.

“The central bank probably sold $7 to $10 million dollars to stem the rupee fall,” said a dealer. “This time the intervention from the SBP (State Bank of Pakistan) seemed quite decisive.”

Zafar Paracha, secretary general the Exchange Companies Association of Pakistan, said ‘finally the central bank stepped in to support the currency and to calm investor nerves”.

Paracha expects the rupee to trade at 186 level in the coming session and likely to strengthen further next week.

“Overseas Pakistanis usually send home more remittance during Ramazan and ahead of Eid. These inflows also helped improve dollar supplies in the market,” he added.

Dealers said the local unit remained under pressure during the last four sessions amid higher import pavements and uncertainty over the International Monetary Fund bailout programme, however, the rupee pared losses after some support came from Eid-related remittances. The rupee depreciated by 2.42 percent during the last four sessions.

“The market was very volatile in early hours, and rupee touched a low of 188 per dollar, but recovered at the close on SBP help,” said another currency dealer. “Though the rupee failed to post a significant recovery, still Eid-related remittances helped rupee gain slight value against the dollar.”

Remittances to Pakistan from its citizens employed abroad hit the highest level for a single month in March, increasing 28.3 percent month-on-month. Dealers said the outcome of the International Monetary Fund (IMF) talks with Pakistan for the revival of the $6 billion loan programme would give a clue for the future direction of the rupee.

Finance minister Miftah Ismail pledged to pursue policies that will meet the demands of the IMF to unlock bailout funds.

Ismail is in Washington to meet IMF officials on their seventh review of the rescue package agreed in July 2019.

If the review is approved, the IMF will release over $900 million and unlock other external funding crucial for the country’s depleting foreign currency reserves.

The country’s forex reserves were at $17 billion during the week ending on April 16. The SBP reserves were at $10.9 billion. These reserves are adequate for less than two months of import payments.