The rupee extended its gains in the interbank market for the third consecutive day on Tuesday, rising to 238 against the dollar.

The local currency, which closed at 238.84 yesterday, gained 84 paise by 10:33am, according to the Forex Association of Pakistan (FAP).

According to the State Bank of Pakistan (SBP), the rupee closed at 238.38, up 46 paise, or 0.19 per cent.

Overall, the PKR has gained Rs1.56 in the interbank market since Friday. It gained 57 paise on Friday, followed by 53 paise in this week’s opening session.

Prior to that, the local currency had been on a consistent decline since July 16.

Mettis Global Director Saad Bin Naseer said there were two primary reasons for the rupee’s recovery — the SBP’s intervention when the local currency had fallen to 240 and the completion of payments for oil imports.

“First, the SBP’s intervention created confidence. Second, the month of August has started and pressure on the rupee in July due to pending oil payments has eased in the ongoing month and thus, the panic in the markets has settled.

“The import bill is very low [in August] and therefore, the impact on the current account deficit is reduced. It appears the rupee will slowly regain its value,” Naseer added.

He noted that the rupee, which had fallen to as low as 250 in the open market last week, was now being bought at 236-237 and sold at 241-242.

“The situation is improving and there are some indications that friendly countries will help as well. Good days are here for the rupee.”

Komal Mansoor, head of strategy at Tresmark, a financial terminal that provides market rates and insights, said, “We think the worst of the currency crisis is now behind us.”

The rupee’s weakening was “likely a result of extraordinary outflows” in July, including imports and coupon payments on dollar Sukuk, she said. The International Monetary Fund (IMF) was expected to meet this week to approve the release of a $1.2 billion tranche to Pakistan and the process could be completed by Aug 20, she noted.

“This has shifted the sentiment into positive territory and we can expect a gradual recovery of the local currency,” Mansoor added.

General Secretary of Exchange Companies Association of Pakistan, Zafar Paracha, also attributed the rupee’s recovery to steps taken by the SBP and law enforcement agencies, which he said, had reduced the smuggling of dollars into Afghanistan.

“The SBP’s steps in recent days have led to a positive movement in the market and the rupee is being strengthened.” He added, however, that the authorities should not be content yet as the situation was not satisfactory.

He said the rupee should be traded at 190 against the dollar.

Paracha said the reduced import bill had led to a decreased demand for dollars in the interbank.

“We will need to monitor smugglers and those involved in hawala/hundi,” he said, adding that all political parties, courts and traders should sit together to discuss economic recovery.

The currency dealer was of the view that the government needed to revisit its transit trade policy regarding Afghanistan as it was causing revenue losses to Pakistani traders. He also suggested the government increase incentives for overseas Pakistanis to send remittances to the country and offer rebates to money changers.