The Pakistani rupee recovered by another Rs2 against the dollar in the interbank market on Thursday.

The local currency closed at Rs221.94 per dollar, an appreciation of 0.9 per cent from yesterday's close of Rs223.94, according to the State Bank of Pakistan.

The rupee, which had fallen close to an all-time low of Rs239.71 on Sept 22, has been recovering since then. It has gained Rs17.77 or 7.41pc in the last 10 sessions.

Mettis Global Director Saad bin Naseer said the State Bank of Pakistan (SBP) and finance ministry's joint probe into banks earning exorbitant profits from their dollar sales had brought calm to the interbank market.

SBP Governor Jameel Ahmad had informed a National Assembly committee on Tuesday that eight banks were being investigated in connection with exchange rate manipulation in the first phase. The rest of the banks would be investigated in the next phase, he had said.

"We believe the supply situation has improved a lot in the last few weeks [and] remittances are also expected to be on a higher side for September. On the other hand, the sudden appreciation of the rupee and the appointment of Ishaq Dar as finance minister — with his former stint in recent memory — forced hoarders to dump their dollar holdings in the market to insulate themselves from further losses. This has further improved dollar liquidity in the market," Naseer told Dawn.com.

He said the rupee recovered in the open market mainly because of a narrower trade deficit in September and the Asian Development Bank's (ADB) announcement of around $2.3-2.5 billion in aid.

FAP Chairman Malik Bostan cited several reasons for the rupee's appreciation, including the ADB announcement and expectations of a consistent decline in imports.

"Pakistan has started receiving funds from around the world for flood relief ... the pressure on the import bill is expected to be reduced and if it does increase, dollars can be arranged."

Bostan said the market expected strict action against banks involved in speculation, adding that as a result, speculators were selling the dollars they had hoarded leading to a reduction in demand for the greenback.

The FAP chairman noted that imports had declined in September after which the central bank was expected to maintain the interest rate. This would further strengthen the rupee, he said.

Provisional data from the Pakistan Bureau of Statistics released earlier this week showed that the import bill fell by 19.72pc to $5.26bn in September from $6.56bn in the same month last year. On a month-on-month basis, the import bill declined by 13.21pc.

As a result of the decline in imports, the trade deficit in September fell by 30.62pc to $2.88bn this year from $4.15bn over the corresponding month last year.

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