Rupee closes at 228.8 after biggest day-on-day appreciation against US dollar

Pakistani rupee witnessed a massive recovery on Wednesday, registering its biggest day-on-day increase against the US dollar in absolute terms to close at 228.8. The significant recovery in the inter-bank market comes after the International Monetary Fund's (IMF) statement citing that Pakistan has managed to meet all pre-conditions for disbursement of the next tranche of its bailout programme.

Additionally, pressure due to import payments subsided, while Pakistan also reported a much narrower trade deficit for July, taking off some pressure on the currency that saw its worst monthly performance in over 50 years in July.

At the end of the session, the rupee closed at 228.8, an appreciation of Rs9.58 or 4.19% against the greenback, according to the State Bank of Pakistan (SBP). On Tuesday, the rupee had settled at 238.38.

In intra-day trading on Wednesday, the currency had dropped as low as 226.49.

A day ago, the IMF stated that Pakistan has met all prior conditions for the combined 7th and 8th review under the Extended Fund Facility (EFF).

Pakistan has met last prior action, says IMF after govt increases petroleum levy

"With the increase in petroleum development levy (PDL), Pakistan has completed the last prior action for the combined seventh and eighth review," said the IMF, adding that the board meeting is tentatively planned for late August once adequate financing assurances are confirmed.

After the Board’s approval, Pakistan will receive around $1.177 billion.

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“By the end of August, it is expected that Pakistan will get a $1.2 billion tranche under the EFF programme as all prior actions are met,” said Trust Securities and Brokerage Limited in a note on Wednesday.

“Hence, it is expected that the market is likely to consolidate.

“The relative consolidation is also expected in forex markets after a continued drop in imports and anticipated correction in demand going forward, subject to the revival of the IMF programme and relative political clarity,” it added.

Tahir Abbas, Head of Research at Arif Habib Limited (AHL), told Business Recorder that the pressure of import payments had subsided, leading to a drop in demand for the dollar.

"This is a supply-demand phenomenon as the demand for dollars has reduced amid a drop in import payments, whereas exporters too, are releasing their proceeds, leading to improvement in inflows," said Abbas.

He said the appreciation momentum could continue in the coming days as well, as government measures to curb the import of bill have resulted in positivity. "Rupee may appreciate to 205-210 in this month," he added.

Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha said the development comes as the "central bank took measures to curb speculation".

“The government and the central bank have taken initiatives to curb smuggling, which is bearing fruit,” Paracha told Business Recorder. "Meanwhile, oil and edible oil imports have also declined, which takes pressure off the currency."

Paracha said the market could see further improvement after the IMF’s disbursement.

Inter-bank market rates for dollar on Wednesday

BID Rs 228

OFFER Rs 230

Open-market movement

In the open market, the PKR gained 11.50 rupees for both buying and selling against USD, closing at 227 and 229, respectively.

Against Euro, the PKR gained 18 rupees for buying and 17.80 rupees for selling, closing at 226 and 228 respectively.

Against UAE Dirham, the PKR gained 3.50 rupees for both buying and selling, closing at 61.50 and 62, respectively.

Against Saudi Riyal, the PKR gained 3 rupees for both buying and selling, closing at 60 and 60.50, respectively.

Open-market rates for dollar on Wednesday

BID Rs 227

OFFER Rs 229