KARACHI: The rupee jumped 4.2 per cent in the interbank market against the US dollar on Wednesday, making the largest single-day gain in years after weeks of battering amid political and economic turmoil.
The rupee closed at 228.80 on Wednesday, up from 238.38 a day earlier, the State Bank of Pakistan (SBP) said, a day after the International Monetary Fund (IMF) said the country had cleared all prior actions needed to unlock the much-needed loan programme.
Fahad Rauf, head of research at Ismail Iqbal Securities, told Reuters news agency that it was the highest rupee rally in both absolute and percentage terms since 1999, according to central bank data.
After two weeks of battering against the dollar, the rupee fell to its lowest level against the dollar on July 28, closing at 239.94. It then started to bounce back from Friday, rising 4.7pc until Tuesday.
Rises 4.2pc to close at 228.80 in interbank market; gold falls Rs9,600 per tola
Currency dealers and experts expect the local currency to continue to recover in the next few days.
SBP Acting Governor Murtaza Syed also said on Wednesday the rupee was undervalued at the moment and the dollar had overshot in the forex market due to several reasons. He assured the business community that the dollar would come down to its “real value” in two to three months.
In the open market, the rupee appreciated by 11 to Rs230 on Wednesday, according to the Exchange Companies Association of Pakistan (ECAP).
ECAP chairman Malik Bostan said the rupee would further gain in the coming days since chances were bright for dollar inflows, as the IMF board is set to meet later this month on Pakistan’s bailout package.
Finance Minister Miftah Ismail recently said Pakistan could receive up to $8 billion after the release of the IMF tranche, which amounts to $1.18bn.
Mr Bostan said the government had taken several measures that aided the rupee’s recovery, including reducing the import bill and hence the trade deficit, cracking down on dollar smuggling to Kabul, and taking a better approach towards opening letters of credit (LCs) — bank documents that guarantee payment.
According to the latest numbers released by the Pakistan Bureau of Statistics, the country’s trade deficit was $2.6bn in July, down 18pc from a year ago and down 47pc from June. Imports fell 13pc from a year ago and 38pc from June to $4.8bn, the lowest level since December 2020.
On Tuesday, Pakistan got the green light from the IMF for the release of $1.18bn of bailout funds after certain conditions were met. The last condition was an increase in the petroleum development levy on July 31.
Atif Ahmed, a currency dealer in the interbank market, said, “Exporters have started selling dollars on a large scale which accelerated the process of rupee recovery.”
He said the central bank was also selling dollars in the interbank market to cool the demand while it discourages forward booking.
However, the inflow of the dollar has yet to begin from bilateral or multilateral creditors, which could improve the SBP-held foreign exchange reserves, which stand at $8.6bn.
Gold falls Rs9,600
The price of 24-karat gold dropped by Rs9,600 per tola to Rs145,300 on Wednesday, down from Rs154,900 the previous day in the local market, the All Sindh Sarafa Jewellers Association said. The price of the 10-gram fold fell by Rs7,373 to Rs124,571.
The price of 22-karat gold dropped to Rs114,190 from Rs120,950 a day earlier. The rate of silver fell by Rs20 to Rs1,620 per tola and by Rs17.15 to Rs1,389 per 10g.
In the international market, gold’s price decreased by $14 to $1,766 on Wednesday, the association said.
Published in Dawn, August 4th, 2022