KARACHI: The rupee on Wednesday remained under pressure as the dollar appreciated further in both interbank and open markets amid strong demand, especially from importers.

Currency dealers said the demand was high but the fear was too high that the dollar would keep increasing under the interim government.

“The weak interim setup was unable to react against the growing uncertainties in the financial sector which badly hit the exchange rate creating wider space for the dollar to appreciate,” said an expert on currency movements.

The dollar gained Rs3.42 or 1.16 per cent to close at Rs294.93 in the interbank market. In the last two sessions, the greenback appreciated by Rs6.44 or 2.23pc.

The rupee staged a sharp recovery to Rs275.44 on July 4 following approval of a $3bn Stand-By Arrangement with the IMF, but the local currency failed to sustain the recovery momentum as the greenback bounced back gaining Rs18.5 till Aug 16.

The open market also followed the same path and noted an increase of Rs22.50 in dollar price since July 4. On Wednesday, the rupee was trading at Rs302.50 to a dollar, according to the Exchange Companies Association of Pakistan.

Currency experts expressed no surprise over the exchange rate trend as it was expected since the PDM government relaxed curbs on imports under IMF pressure which could further erode the PKR value in a few weeks since the country’s foreign exchange reserves are not enough to meet its external obligations, said a currency dealer in the interbank market.

Some currency experts said the inflows of remittances and exports have declined in July and they have a tendency to fall since the beginning of calendar year 2023. In FY23 remittances and exports jointly fell by $8.2bn. July FY24 also noted declines.

Published in Dawn, August 17th, 2023