Rupee maintains uptrend for seventh session

Our Correspondent
Thursday, Aug 11, 2022

KARACHI: The rupee closed stronger on Wednesday, witnessing a seventh consecutive day of gains, as exporters continued to sell dollars and signs of economic stability boosted sentiment on the local unit.

The rupee ended at 221.91 per dollar, higher than its close of 224.04 on Friday in the interbank market. It gained 2.13 rupees or 0.96 percent.

In the open market, the local currency continued to post a sharp recovery, closing at 218 versus the greenback. It gained 4 rupees during the session. Dollar conversions from exporters have been consistently strong in recent sessions with the economic indicators signaling a positive outlook, dealers said. “The demand for the greenback from importers remains in check and good inflows from exporters supported the rupee,” said a currency dealer.

“The expectation of a lower current account deficit and the release of the International Monetary Fund (IMF) disbursal will help the rupee to gain further in the coming days,” he added.

Pakistan's current account deficit is expected to narrow to $8.7 billion or 2.3 percent of gross domestic product this fiscal year from $17.4 billion or 4.5 percent of gross domestic product (GDP) a year ago, according to analysts. Imports are likely to fall due to government measures and lower commodity prices. The IMF’s executive board is likely to approve a staff-level agreement with Pakistan by end of the current month as the government has reportedly met all conditions of the Fund. The approval would pave the way for the release of a $1.2 billion tranche from the IMF to the country.

The fair value of the rupee on the real effective exchange rate metric is around 205, but given the vulnerabilities on the external front and taking into account inflation trajectories, it is likely the market to gravitate towards the 220-225 level for the next few weeks, said Tresmark in a note.

“Even the market seems to have accepted this level, closing the week at 224. Neither have Swap levels gained, which shows that banks are still running a heavy short position, nor have exporters started selling forwards in substantial amounts,” it added.

News flows, like oil going down further or friendly countries committing more money, would dictate the rupee parity in the short term, but the 220-225 seemed to be an equilibrium play, it stated.