KARACHI: The rupee continued its northward trend on Monday as it gained 18 paisas in the interbank market to close the session at Rs158.91 against the dollar.

“A weaker US dollar and a current account flattered by thus far buoyant remittances and subdued oil and non-oil imports have all helped the rupee recently,” said Hasnain Malik, Managing Director Emerging and Frontier Markets Equity Strategy at Tellimer.

“With low foreign reserves, the currency is by no means out of the woods. Long-term, the only guarantor of consistently stable or stronger currency is growth in exports.”

Bloomberg data showed the rupee was the third-best performing currency in Asia behind the Indonesian Rupee and South Korean Won. The Pakistani currency has appreciated by 3.1pc since October 1 whereas the Indonesian Rupiah -- first on the list -- improved by 4.51pc and South Korean won at second place appreciated 3.6pc during the month.

Bloomberg says it’s third-best performing currency in Asia

The rupee is currently at its six-and-half month high, appreciating by Rs9.52 or 5.6 per cent against the greenback since hitting an all-time low of Rs168.43 on August 26. Meanwhile, in the open market on Monday, the dollar was down 50 paisas at Rs158.80. The dollar in the open market has fallen as much as Rs10.2 from after peaking at Rs169.

“I think the appreciation of the currency against the US dollar [has] surprised many. It was possibly driven by the current account surplus as well as inflows from overseas Pakistanis through Roshan Digital,” says KASB Securities Chairman Ali Farid Khawaja.

However, Khawaja adds that it is of course neither sustainable nor advisable. “The government wants to improve exports and has given a target of $37 billion of exports and we know that a stronger PKR hurts exports.”

“I think the exchange rate fluctuation reflects the timing of the flows. It will depreciate when the government will need to make the debt repayments which are due later in the fiscal year. The good thing is that the movement of the exchange rate shows that it is not managed and can move in either direction depending on the demand and supply situation,” he added.

Sharing outlook on the exchange rate, he said that “the current account surplus and exchange rate movement shows that now it has been brought under control. The real test will be how the International Monetary Fund reacts to it once we get back into the program. Will they make a currency depreciation a precondition for the resumption of the program? I think they might.”

Published in Dawn, November 10th, 2020