KARACHI: The interbank exchange rate closed at Rs280.29 per dollar on Wednesday as the local currency lost 1.16 per cent value from a day ago.

The increase of Rs3.26 in the dollar rate marked the second consecutive day of the rupee’s depreciation, which follows an unusually long period of the local currency gaining strength against the greenback for 28 straight sessions.

The overall gain in the rupee’s value since Sept 5, when the exchange rate hit the highest level of Rs307.10, has been 8.73pc.

Analysts believe the reversal of the month-long trend in the foreign exchange market is reflective of growing pressure on the dollar. According to Arif Habib Ltd Head of Research Tahir Abbas, there’s a higher demand for the greenback in the banking market for upcoming foreign payments, which is leading to some erosion in the rupee’s newfound strength.

Citing banking sources, Topline Securities Ltd CEO Mohammed Sohail said on Wednesday that Pakistan has made a six-month coupon or interest payment on its dollar-denominated eurobond, which is set to mature in six months i.e. April 2024.

However, former chairman of the Federal Board of Revenue (FBR) Shabbar Zaidi said in a social media post on Wednesday that the latest hike in the dollar rate is “artificial”. He called for communicating the names of frequent buyers of dollars from exchange companies to the State Bank of Pakistan (SBP) and the FBR. He also called for the SBP staff to inspect the sales of exchange companies on a daily basis to help control the reversal in the exchange rate movement.

Mr Abbas of Arif Habib Ltd foresees the exchange rate’s consolidation in the 275-280 range. The future direction of the exchange rate largely depends on the upcoming review of the loan programme by the International Monetary Fund (IMF) in November, which is a prerequisite for the disbursement of the next tranche necessary to maintain the country’s balance of payments.

A favourable review by the IMF will pave the way for foreign exchange inflows from other multilaterals. In addition, upcoming data on export proceeds and overseas workers’ remittances will also help determine the exchange rate direction, he said.

Published in Dawn, October 19th, 2023