PKR Records Incremental Gains, Settles at 279.85 Against USD

The Pakistani rupee (PKR) witnessed a slight uptick of 4.51 paisa against the US dollar during Monday's interbank session, concluding the trading day at PKR 279.85 per USD. This marks a marginal improvement from the previous session's closing rate of PKR 279.9 per USD.

Throughout the day, the currency reached an intraday high (bid) of 280.1 and a low (ask) of 279.8.

In the open market, exchange companies listed the buying rate for the dollar at 279 and the selling rate at 281.

In a significant development, 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, published by the fund, underscores the importance of allowing the exchange rate to be determined by the market. It emphasizes the gradual deepening of the foreign exchange (FX) market.

The IMF staff highlighted that encouraging banks to manage FX flows through the interbank market could lead to increased liquidity in the FX market. This, in turn, might result in a rebound in trading volumes to levels observed several months ago.

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

The agreement between the IMF Staff and the authorities suggests that State Bank of Pakistan's (SBP) interventions in the FX market should focus on building FX buffers. Sales should not be used to prevent a trend depreciation of the rupee driven by fundamentals.

Simultaneously, the government commits to eliminating existing exchange restrictions and multiple currency practices in early 2024. Planned reforms in the EC sector by SBP could enhance oversight, governance, and transparency.

The government's dedication to the FX market is evident through the finalization of preparations for transitioning to a new trading platform for spot transactions by end-January 2024. Additionally, a feasibility study for conducting FX purchases and sales via auctions, along with the publication of auction results, is planned by the end of March 2024.

In line with its mandate to implement an exchange rate policy, SBP is developing a framework to monitor pricing and broader developments in informal markets. A report with findings is expected by end-March 2024.

Given the challenge of limited reserve buffers for establishing external stability, SBP's interventions in the FX market will focus on building FX buffers, with sales limited to episodes of disorderly market conditions.

The British Pound strengthened by 39.06 paisa, closing at 355.33 compared to 354.94 from a day ago.

The Swiss franc incurred losses of 20.03 paisa, closing at 322.08 versus 322.28 from the previous session.

Against the Japanese Yen, PKR lost 0.19 paisa, closing at 1.8895 versus 1.8876 a day ago.

The Chinese Yuan lost 2.38 paisa, closing at 38.89 against 38.91 from the previous session.

The Saudi Riyal closed at 74.62 with a loss of 1.2 paisa from its value of 74.63 a day ago.

The U.A.E Dirham decreased in value by 1.34 paisa from 76.19 a day ago to 76.21.

Throughout the current financial year, PKR has appreciated against the Dollar by 6.14 rupees or 2.19%. In the current calendar year, PKR has appreciated by 2.01 rupees or 0.72%.

In the Money Market, the benchmark 6-month Karachi Interbank Bid and Offer rates slightly increased by 14 basis points to 20.58% and 20.83%.