Pakistani Rupee Climbs Further, Gaining 6 Paisa Against US Dollar

The Pakistani rupee (PKR) showcased resilience in the interbank session on Tuesday, marking a noteworthy ascent of 5.82 paisa against the US dollar. The currency concluded trading at PKR 279.79 per USD, surpassing the previous session's closing rate of PKR 279.85 per USD.

During the day, PKR reached an intraday high (bid) of 280 and a low (ask) of 279.75.

A significant development unfolded as Pakistan received the second installment of SDR 528 million, equivalent to $705.6 million, from the International Monetary Fund (IMF) last week.

The first review report under the Standby Arrangement stressed the importance of allowing the market to determine the exchange rate. Emphasis was placed on gradually deepening the foreign exchange (FX) market.

The IMF staff highlighted the need for increased FX market liquidity, emphasizing that it could lead to a resurgence in trading volumes. This, however, would only happen if banks actively managed FX flows through the interbank market, providing exchange rates to facilitate the inflow of FX when required.

To act as a shock absorber, the IMF urged the government to refrain from imposing formal or informal restrictions on the exchange rate.

Agreements were reached between the IMF Staff and the authorities, emphasizing that the State Bank of Pakistan's (SBP) interventions in the FX market should focus on building FX buffers, with sales not preventing natural rupee depreciation driven by fundamentals.

Simultaneously, the government pledged intensified efforts to eliminate existing exchange restrictions and multiple currency practices by early 2024.

Reforms in the Exchange Companies (EC) sector by SBP could enhance oversight, governance, and transparency. Further efforts to monitor pricing in informal exchange rate markets were recommended to identify periods of market dysfunction.

The government reaffirmed its commitment to the FX market, finalizing preparations for a new trading platform for spot transactions connecting all banks, scheduled to go live by the end of January 2024.

Additionally, a feasibility study for conducting FX purchases and sales via auctions, along with the publication of auction results, is set to be undertaken by the end of March 2024.

In line with its mandate, SBP is developing a framework to monitor pricing and broader developments in informal markets, with findings set to be published by end-March 2024.

Given the limited reserve buffers as the primary constraint for external stability, SBP's interventions in the FX market will remain focused on building FX buffers, with sales limited to episodes of disorderly market conditions and not used to prevent a trend depreciation of the rupee driven by fundamentals.

Comparatively, PKR experienced a loss of 18.84 paisa against the Euro, closing at 305.03 from the previous value of 304.84.

The British Pound strengthened, gaining 1.02 rupees and closing at 356.34 compared to 355.33 the previous day.

The Swiss franc witnessed gains of 54.58 paisa, closing at 322.62 compared to 322.08 in the previous session.

Against the Japanese Yen, PKR lost 0.98 paisa, closing at 1.8993 versus 1.8895 a day ago.

The Chinese Yuan gained 13.91 paisa, closing at 39.03 against 38.89 from the previous session.

The Saudi Riyal closed at 74.6 with a loss of 1.35 paisa from its value of 74.62 a day ago.

The U.A.E Dirham decreased in value by 1.48 paisa from 76.18 a day ago to 76.19.

In the current financial year, PKR has appreciated against the Dollar by 6.2 rupees or 2.22%. Meanwhile, the calendar year has seen PKR appreciate by 2.07 rupees or 0.74%.

In the Money Market, the benchmark 6 Month Karachi Interbank Bid and Offer rates edged up by 2 bps to 20.6% and 20.85%.