The PKR gained Rs1.65 against the dollar during interbank trade on Tuesday, marking the eighth consecutive session that it has recovered.
The local currency closed at Rs225.64 per dollar, according to the State Bank of Pakistan (SBP). This equates to an appreciation of 0.73 per cent from yesterday’s close of Rs227.29.
The PKR has recovered Rs14.07 or 5.87pc against the greenback in eight sessions.
Saad bin Naseer, director of financial data and analytics portal Mettis Global, said exchange rate movements in Pakistan were driven by sentiments instead of economic fundamentals.
“Fundamentals are still the same but perception has changed which was much needed in such a crucial time.”
Naseer said it was “not difficult” to improve the rupee’s value to 200 per dollar with better management and strict enforcement. He added, however, that factors such as the real effective exchange rate and current account deficit should be considered while “pushing the exchange rate to a desirable level”.
The government must ensure that speculators would be held accountable without any hesitation, he said.
Forex Association of Pakistan (FAP) Chairman Malik Bostan said the dollar’s value had been “artificially increased” and was now declining because of the government’s strict monitoring. He expected the rupee to further appreciate in the interbank market in the coming days.
Bostan also noted that inflation had eased to 23.18pc in September from a 49-year high in the preceding month. As a result, the central bank was expected to either maintain or reduce the interest rate instead of tightening monetary policy, which could strengthen the rupee, he elaborated.
The market also expected that the International Monetary Fund (IMF) would ease conditions under the ongoing programme in view of the devastating floods, which would help strengthen the PKR, the FAP chairperson said.
A day earlier, Finance Minister Ishaq Dar said the rupee was undervalued and it should be below Rs200 against the dollar.
“The actual value of the Pakistani rupee is less than Rs200 against the US dollar and it will be brought down as it is currently undervalued.”
However, currency experts fear that any artificial exchange rate will ultimately hurt the economy as was witnessed when the same finance minister during his tenure up to 2018 brought down the rupee below Rs100. The cheaper dollar encouraged imports which resulted in a huge trade gap and his government ended with an unprecedented $20bn current account deficit.
Speaking to Dawn.com today, Alpha Beta Core CEO Khurram Schehzad cautioned that the finance minister “should not talk about setting currency parity, or at least not openly” as it was the State Bank of Pakistan’s prerogative and the government had committed to the IMF that the finance ministry would not interfere in the central bank’s matters.
Instead, the government should hold the SBP accountable for “achieving a realistic currency parity (in line with fundamentals) as well as taming inflation (demand side), while managing supply side disruptions via a thorough strategy (farm to market management with necessary imports in time)”, he commented.