Pakistani Rupee Maintains a 10-Week Winning Streak Against USD

In the latest market update, the Pakistani rupee (PKR) continued its upward trend, gaining 46 paisa to settle at PKR 279.9 against the US Dollar (USD). This marks the currency's tenth consecutive week of strengthening against the mighty Dollar.

The sustained positive performance can be attributed to several factors, including enhanced macroeconomic conditions. Tighter enforcement of regulations has led to increased liquidity in the foreign exchange market, complemented by a reduction in the money supply. A surplus in the balance of payments, driven by lower import demands, and a temporary moratorium on Chinese debt repayments have further contributed to the stability.

Market sentiments received a significant boost as Pakistan received the second installment of SDR 528 million (equivalent to $705.6 million) from the International Monetary Fund (IMF). Additionally, the release of favorable economic data during the week indicated stability and improvement in economic indicators.

The Real Effective Exchange Rate Index (REER) for the PKR rose by 0.6% MoM in December 2023, reaching a provisional value of 98.86, up from the revised value of 98.28 in November 2023. Moreover, Pakistan recorded a current account surplus of $397 million, attributed to decreased imports and increased exports. Foreign investments also played a pivotal role, with the nation attracting $243 million in December, a 56% increase from the previous month and the highest level in a year.

Despite the positive developments, the International Monetary Fund (IMF) cautioned that while economic activity has stabilized, the outlook remains challenging and contingent on the implementation of sound policies.

The State Bank of Pakistan (SBP) conducted an auction of fixed-rate Pakistan Investment Bonds (PIBs) during the week, witnessing a decline of up to 50 basis points in yields. Market participants are speculating on a potential decrease in interest rates in the coming months, anticipating that the policy rate has already peaked.

In comparison to major currencies, the PKR showcased noteworthy movements. Against the Euro, it gained 3.38 rupees, closing at 304.47 compared to the previous week's 307.85. The British Pound became cheaper by 3.25 rupees, closing at 354.94 compared to 358.18 a week ago. The Swiss franc saw losses of 6.8 rupees, closing at 322.28 compared to 329.08 from the previous week. Against the Japanese Yen, the PKR gained 4.66 paisa, closing at 1.888 versus 1.934 a week ago. The Chinese Yuan lost 22.9 paisa, closing at 38.91 against 39.139 from the previous week. The Saudi Riyal closed at 74.627 with a loss of 12.69 paisa from its value of 74.754 a week ago, while the U.A.E Dirham decreased in value by 12.75 paisa from 76.206 a week ago to 76.333.