THE rupee appeared to be in search of direction last week against the dollar amid political uncertainty in the local currency market.

Though State Bank of Pakistan’s (SBP) strict monitoring helped the rupee stabilise to some extent, the parity continued to show sharp variations. The rupee plunged Rs3.50 against the dollar a week earlier.

Analysts believe that the artificial support for the rupee has adversely affected Pakistan’s exports and the market needs greater exchange flexibility. Currency players look confused over the prevailing situation. The International Monetary Fund (IMF) has once again reiterated its stance that the rupee is overvalued by 10 to 20 per cent and needs correction.

Analysts believe that the artificial support for the rupee has adversely affected Pakistan’s exports

On the interbank market, the dollar continued to trade slightly expensive against the rupee last week. However, SBP’s strict monitoring and tightening of some rules regarding foreign exchange management to check outflows helped the rupee to stabilise.

In the open market, the rupee did not show any change on Monday and Tuesday and traded flat at Rs106.20 and Rs106.40.

On Wednesday, the dollar managed to gain strength over the rupee after SBP’s new directives to stabilise the local unit.

On firm demand for dollar from the general public, the rupee gave up its firmness and lost 40 paisa on the buying counter and 50 paisa on the selling counter. As a result, the dollar traded at Rs106.60 and Rs106.90.

The rupee staged a partial recovery on Thursday. It picked up 10 paisa, pushing dollar slightly lower at Rs106.50 and Rs106.80 due to lower demand of dollar.

On Friday, the rupee turned negative against the dollar due to demand pressure, losing 20 paisa. The dollar thus hit the week’s highest level against the rupee at Rs106.70 and Rs107.00 towards the close of the week.

During the week, the dollar managed to post 50 paisa gain on the buying counter and 60 paisa gain on the selling counter in the open market.

Against the euro, the rupee showed sharp variation last week. Starting the week on firm note, the rupee was seen changing hands at Rs120.25 and Rs121.25 in the first trading session as it did not show any change on the buying counter while posting five-paisa gain on the selling counter against the last closing at Rs120.25 and Rs121.30.

The rupee, however, failed to hold its overnight firmness and shed 15 paisa on both the counters to trade Rs120.40 and Rs121.40 in the second trading session.

On a week-on-week basis, the euro posted 65 paisa gain against the rupee on buying counter and 60 paisa gain on the selling counter, trading between the high of Rs121.25/Rs122.25 and low of Rs120.25/Rs121.25 amid fluctuation.

Published in Dawn, The Business and Finance Weekly, July 17th, 2017