ISLAMABAD: Pakistan's rupee witnessed back-to-back gains against the US dollar, appreciating another 0.14% in the inter-bank market on Wednesday.
As per the State Bank of Pakistan (SBP), the PKR closed at 175.48 against the USD after a day-on-day appreciation of 24 paisas or 0.14%. On Tuesday, the rupee had closed at 175.72 against the dollar in the inter-bank market, a day after falling to its weakest level of 176.20 on November 29, 2021.
"The appreciation comes on the back of several factors," Saad Khan, Head of Research at IGI Securities, told Business Recorder.
“The drop in commodity prices in the international market suggests that the import bill will reduce in the coming months, which would ease the pressure on the current account deficit,” said Khan.
Furthermore, the government has been very active in its "reserve-building exercises", said the analyst, adding that the $3-billion deposit agreement between the Saudi Development Fund (SDF) and SBP, alongside government's decision to float $1 billion in Sukuk funds in the coming days, would help increase foreign exchange reserves.
“The materialisation of these measures would allow rupee to appreciate further."
He added that the recent hike in policy rate would also help reduce inflation that clocked in at 11.5% for November.
Pakistan's annual consumer price inflation rate rose to 11.5% in November, the Pakistan Bureau of Statistics shared earlier. This is the highest level in 21 months.
Meanwhile, Saad Hashmey, Executive Director at BMA Capital, told Business Recorder that the central bank's measure to increase the policy rate by 150 bps “would help strengthen the local currency”.
Hashmey said that the Real Effective Exchange Rate (REER) is well below 100, implying that the PKR remains undervalued and has room for appreciation.
“However, challenges remain on the current account front, which is expected to widen, and that could impact the exchange rate stability,” said Hashmey.
Inter-bank market rates for dollar on Wednesday
BID Rs 175.72
OFFER Rs 175.82
In the open market, PKR gained 70 paisas for both buying and selling against USD, closing at 176.30 and 177, respectively.
Against Euro, PKR remained unchanged for both buying and selling, closing at 198.10 and 200, respectively.
Against UAE Dirham, PKR gained 76 paisas for buying and 80 paisas for selling, closing at 48.75 and 49.20, respectively.
Against Saudi Riyal, PKR gained 10 paisas for both buying and selling, closing at 46.40 and 46.85, respectively.
Open-market rates for dollar on Wednesday
BID Rs 176.30
OFFER Rs 177
This article was first published in Business Recorder on Dec 1, 2021.