The Pakistan rupee has completed a one-month winning streak against the US dollar, gaining 23.50 against the greenback in the interbank market since September 5. This remarkable performance is attributed to a military-backed crackdown on currency smugglers.
As of today, the local currency is trading at 283.60 per dollar in the interbank market, marking a further gain of 1.8 against its US counterpart.
On September 5, the Pakistani rupee had faced a significant decline, falling to 307.10 against the dollar in the interbank market. However, it has steadily recovered since then, thanks to the crackdown initiated against currency smugglers, hoarders, and speculators.
In the previous trading session, the rupee closed at 284.68 to the dollar, exhibiting a 0.37% increase compared to the previous day’s closing rate of 285.72.
Financial analysts attribute the rupee’s continuous appreciation to the decreased demand for dollars in the black market.
Samiullah Tariq, the Head of Research at Pak-Kuwait Investment Company, commented, “In my view, PKR appreciated against the dollar as illegal demand vanished after the crackdown.” Tariq further predicted that the rupee may strengthen to 280 against the dollar in the days to come.
Mustafa Mustansir, the Head of Research at Taurus Securities, emphasized that the crackdown on grey markets and illegal hoarding of dollars has been a key factor driving the rupee’s rise. He stated, “Plus, we believe that the illegal flow of dollars to Afghanistan has also stopped. Further, the restructuring of the exchange companies sector by the SBP has also had a significant impact. Overall, these measures have led to heavy selling of dollars in the open market. I think the rally will continue.”
While the near-term outlook for the rupee appears positive, its medium-term trajectory will depend on the country’s economic fundamentals, particularly the outcome of the International Monetary Fund’s (IMF) review of the stand-by arrangement (SBA) and the status of foreign exchange reserves. An IMF review is expected in late October or early November 2023, which could further influence the rupee’s performance.
