With a six and a half month high at 158.9 against the US dollar, the Pakistani rupee became the third best performing Asian currency on Monday.
In the previous session, the rupee closed at 159.09 in the interbank market, with 18 countries appreciating against the dollar during the session. It gained 30 paisas to settle in the open market at 158.8 against the dollar and was also up Rs10.2 or 5% from a low of 169.
Analysts said the rupee made it to the list of the top-performing currencies in Asia, up 3.1% against the US dollar since Oct. 1, making Asia’s third-best-performing currency position after the Indonesian rupiah. and the South Korean won.
The Indonesian currency rose 4.5% while the extracted currency rose 3.6%.
Since August 26, the Pakistani rupee has made a gain of Rs9.52 or 5.6%. Traders said the currency continued to appreciate against the dollar due to increased inflows. Demand for dollars by importers remains subdued in the market.
“There were routine [import] payments, while forward sales of dollars by exporters have increased in recent days,” said a currency trader. Traders also said the central bank will not intervene to avoid a sustained appreciation in the exchange rate.
Increased foreign exchange reserves, robust remittances, improved balance of payments position and recovery of Pakistani foreign inflows have contributed to the strengthening of the rupee’s value.
Many dealers expect the rupee rally to continue for the next few days. “We expect the rupee to trade around 157 levels against the dollar in the coming trading sessions,” said another trader. Analysts said a drop in the PKR / USD parity eases the pressure on the country’s external debt, as well as imported inflation in the country.
“Exports should not be harmed in the short term as the country’s export capacity is said to be already 100-120%, while the real effective exchange rate index (which measures competitiveness relative currency parity) can also further improve in PKR / USD parity, Said analyst Khurram Schehzad in a tweet.
“Therefore, the improvement in monetary parity should result in a greater capacity of the country to service its external debt, and to control the imported inflation that affects the masses.” There are several reasons for the rupee’s appreciation in recent days.
Pakistan’s state bank is not selling dollars to support the national currency amid the increase in the country’s foreign exchange reserves. SBP’s swap portfolio has improved and has earned approximately $ 900 million in forward tranches month-over-month. Foreign currency financing to banks remains uninterrupted, as evidenced by the fact that their net open positions have not deteriorated.
Response times for large import payments have been shortened and the SBP allows coverage of 50% of payments based on letters of credit. Foreign exchange reserves rose to $ 19.4 billion in the week ending October 29, from $ 19.3 billion a week earlier.
Central bank reserves increased by $ 61 million to $ 12.2 billion. However, the planned outflow of about $ 2 billion this year and fears of increasing coronavirus infections pose a risk to the economic recovery and the rupee outlook.