The Pakistani rupee has shown remarkable resilience, appreciating by 1.4% against the US dollar in the interbank market over the past week, positioning itself as one of the best-performing currencies for the month.
By the close of trading on Thursday, the dollar was valued at Rs287.74, marking a significant decrease of 1.4% from the previous week when it stood at Rs291.76, according to the State Bank of Pakistan. This positive trend in the rupee’s value was observed consistently throughout the week.
Notably, the Pakistani rupee had faced a record low of 307.1 against the US dollar on September 5. However, it made a swift recovery following robust actions taken by the country’s financial regulator and security agencies to combat black market operations.
The crackdown on illicit foreign exchange dealers in the informal market led to the return of tens of millions of dollars to Pakistan’s interbank and open markets, as reported by dealers.
Overall, the local currency has seen an impressive gain of approximately 6.1% during this period.
The finance ministry has attributed this positive development to the government’s strong administrative actions against unlawful foreign exchange dealers and hoarders in commodity markets. This has contributed to stabilizing the exchange rate, alleviating imported inflation, and mitigating commodity price pressures.
Before the crackdown, the US dollar was trading at approximately Rs332 in the open market. According to the Exchange Companies Association of Pakistan (ECAP), the open market saw the dollar depreciate to Rs288.5 on Thursday, continuing the trend observed throughout the week.
To sustain this upward trajectory, experts emphasize the importance of attracting foreign direct investment (FDI) into export-oriented sectors. While acknowledging the recent improvement in the rupee’s performance, they also highlight the currency’s prior depreciation, making it one of the worst-performing in recent years.
Samiullah Tariq, the head of research and development at Pak-Kuwait Investment Company, expresses optimism about the rupee’s strengthening but underscores the need for consistent inflows in the coming months to solidify the PKR’s position. He notes that despite positive sentiment, the rupee remains weaker year-on-year.
CEO Mohammed Sohail of Topline Securities expects the rupee to continue strengthening in the short term due to regulatory actions. However, he suggests that the currency’s medium-term fate hinges on economic fundamentals, particularly the status of foreign exchange reserves and the outcome of the IMF loan review scheduled for November.
