KARACHI: The rupee continued its recovery drive for the fifth consecutive session against the US dollar on Thursday as it gained another Rs2.65 in the interbank market.

The currency market dealers said the dollar closed further lower at Rs226.15 from Rs228.80 the previous day when the local currency appreciated by a record single-day gain of Rs9.58 or 4.19 per cent.

This major gain by the rupee has brought exchange rate stability as currency dealers feel that the fluctuations would not be as volatile as were witnessed in July when the greenback gained over 13 per cent in a single month against the local currency.

The dollar was losing in the wake of some major developments and statements from the government and the State Bank of Pakistan. The key development was the satisfactory reply from the IMF which said that Pakistan met the preconditions for approval of loans in the meeting scheduled to be held on Aug 24.

The low imports and sharp decline in trade deficit in July encouraged local currency to reclaim its lost space.

However, the currency dealers were not sure how long the current appreciation of the rupee was sustainable as the inflows are still in pipeline in the form of promises. The finance minister has again sought to reassure the market that dollar inflows are expected shortly while the State Bank says the rupee is undervalued.

Currency dealers said the market sentiments have changed during the last week which supports the local currency while discouraging the speculators who were taking undue advantage of the vulnerable exchange rate.

The currency dealers maintained that the inflows of export proceeds continued for the last five days which was one of the main reasons for the higher availability of dollars in the market. The open market reported that the dollar lost another Rs3 to trade at Rs226.

SBP reserves fall

The State Bank of Pakistan said its reserves decreased by $190m to $8.385 billion during the week ended on July 29 due to external debt and other payments.

The foreign reserves held by commercial banks were $5.823bn while the country’s total reserves were $14.208bn.

Published in Dawn, August 5th, 2022