Rupee closes below 278 against US dollar after over 5 months

The Pakistani rupee made further improvement against the US dollar on Thursday and closed below 278 level after more than five months.

The local unit appreciated 0.05% in the inter-bank to close at 277.91 against the greenback, a gain of Re0.13 as compared to the previous day.

On Wednesday, the rupee had settled at 278.04, according to the State Bank of Pakistan (SBP).

The last time the rupee had closed below 278 level was on April 9, 2024.

The currency market is now factoring in the International Monetary Fund (IMF) Executive Board meeting that is scheduled to take Pakistan’s 37-month Extended Fund Facility (EFF) of about $7 billion on its agenda on September 25.

Internationally, the US dollar rose broadly on Thursday, recovering from an earlier tumble in the immediate aftermath of the Federal Reserve’s outsized interest rate cut that had been largely priced in by markets.

The US central bank on Wednesday kicked off its monetary easing cycle with a larger-than-usual half-percentage-point reduction that Chair Jerome Powell said was meant to show policymakers’ commitment to sustaining a low unemployment rate now that inflation has eased.

While the size of the move had been anticipated by investors in part due to a slew of media reports pointing in that direction ahead of the decision, it defied the expectations of economists polled by Reuters, who were leaning toward a 25-basis-point cut.

Still, markets reacted in a typical “buy the rumour, sell the fact” fashion that kept the dollar on the front foot in early Asian trade. It rebounded from a more than one-year low against a basket of currencies in the previous session and was last marginally higher at 101.03.

Fed policymakers on Wednesday projected the benchmark interest rate would fall by another half of a percentage point by the end of this year, a full percentage point next year and half of a percentage point in 2026, though they said the outlook that far into the future is necessarily uncertain.

Oil prices, a key indicator of currency parity, rose on Thursday after a large interest rate cut from the US Federal Reserve, but Brent was still hovering around its lowest levels of the year, below $75, on expectations of weaker global demand.

Brent crude futures for November were up 81 cents, or 1.1%, to $74.46 a barrel at 0750 GMT, while WTI crude futures for October were also up 1.1%, rising 75 cents to $71.66 a barrel.

The benchmarks recovered after falling in early Asian trade.

The US central bank cut interest rates by half a percentage point on Wednesday.

Interest rate cuts typically boost economic activity and energy demand, but the market also saw it as a sign of a weaker US labor market that could slow the economy.

Inter-bank market rates for dollar on Thursday

BID                            Rs 277.91

OFFER                      Rs 278.11

Open-market movement

In the open market, the PKR gained 7 paise for buying and remained unchanged for selling against USD, closing at 279.41 and 280.70, respectively.

Against Euro, the PKR lost 10 paise for buying and 21 paise for selling, closing at 308.92 and 311.92, respectively.

Against UAE Dirham, the PKR remained unchanged for both buying and selling, closing at 75.55 and 76.30, respectively.

Against Saudi Riyal, the PKR gained 4 paise for buying and 7 paise for selling, closing at 73.80 and 74.49, respectively.

Open-market rates for dollar on Thursday

BID                            Rs 279.41

OFFER                      Rs 280.70