Rupee ends depreciation run, settles with 0.72% gain against US dollar

Pakistan’s rupee ended its three-session depreciation run against the US dollar, and settled with a gain of 0.72% in the inter-bank on Monday, even as the greenback strengthened against other currencies.

As per the State Bank of Pakistan (SBP), the rupee closed at 220.89 after an appreciation of Rs1.58.

During the previous week, the rupee fell 0.73% against the US dollar. Its reported shortage in the open market and the long-march announcement by Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan caused a bit of a stir among official circles.

In a key development on Saturday, however, Federal Minister for Finance and Revenue Ishaq Dar said the government has initiated efforts to control volatility and keep the exchange rate at its real value.

Dar warned of strict action against those institutions found to be involved in unlawful practices. He asked banks and ECs to avoid manipulation of the dollar.

Experts attributed the rupee's gain in the currency market to the finance minister's comments.

“Ishaq Dar’s meeting with banks and exchange companies have improved the confidence in the market,” Samiullah Tariq, Head of Research at Pak Kuwait Investment Company Limited, told Business Recorder.

The government took market participants into confidence regarding the economic situation of the country, he added.

On the smuggling of dollars, Tariq said that the government has imposed checks and balances on exchange companies. “The enforcement of these measures will have an effect,” he added.

The analyst said the announcement of expected flows from China amid Prime Minister Shehbaz Sharif's visit to the neighbouring ally in November would also boost market confidence.

Visit to China aimed at enhancing trade, attracting FDI: PM Shehbaz

He said that the local currency would strengthen further and is expected to appreciate to the 215-220 level in coming days.

Meanwhile, the Ministry of Finance in its Economic Update and Outlook for October 2022 has said that for the future path of inflation, the exchange rate is of utmost importance.

“Moderating inflation also contributes to exchange rate stability, which in the benign case may generate a virtuous inflation-exchange rate cycle. Further, exchange rate stability requires sound economic fundamentals. Besides inflation, also a manageable current account deficit and guaranteed financing of this deficit by healthy financial inflows are required. When markets get convinced about these prospects, speculative bubbles in the exchange market would be highly unlikely,” read the report.

Globally, the US dollar advanced on Monday, regaining some ground lost earlier in the month, at the start of a week packed with data releases and central bank rate-setting meetings, including by the Bank of England and the US Federal Reserve.

The Fed is expected to deliver another 75 basis points rate hike after the conclusion of the FOMC meeting on Wednesday.

Against a basket of currencies, the US dollar index firmed at 110.81, pushing some distance away from a one-month trough of 109.53 hit last week.

Oil prices, a key indicator of currency parity, fell over $1 on Monday following weaker-than-expected factory activity data out of China and on concerns that the country’s widening COVID-19 curbs will curtail demand.

Inter-bank market rates for dollar on Monday

BID Rs 220.90

OFFER Rs 221.90

Open-market movement

In the open market, the PKR gained 25 paisas for buying and 50 paisas for selling against USD, closing at 225 and 227, respectively.

Against Euro, the PKR lost 5.50 rupees for buying and 5.55 rupees for selling, closing at 229 and 231.25 respectively.

Against UAE Dirham, the PKR lost 80 paisas for both buying and selling, closing at 65.50 and 66, respectively.

Against Saudi Riyal, the PKR lost 1.70 rupees for both buying and selling, closing at 61.50 and 62.10, respectively.

Open-market rates for dollar on Monday

BID Rs 225

OFFER Rs 227

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