KARACHI: Though the rupee has been appreciating against the dollar in what dealers describe as a managed way, the market expects the local currency to break the Rs280 barrier by the end of this month.

At the same time, market players believe it will be difficult for the State Bank to engineer a weaker rupee to boost exports, arguing that past experiences of devaluation failed to deliver a sustained increase in export volumes.

Some currency experts said the scope for further devaluation to support exports was limited, particularly as the US dollar itself has come under pressure against major global currencies.

“There is no mathematical calculation behind this expectation that the dollar may slip below Rs280 by the end of this month. It is the market sentiment and it happens at the end of the year,” said Atif Ahmed, a currency dealer in the interbank market. He believes the dollar will slip below Rs280 only for a brief period.

Experts warn against devaluation, say past episodes failed to increase exports

Other experts said dollar demand would remain steady but sentiment had improved after a $3 billion rollover from Saudi Arabia, which they expect to support the rupee.

“If anything, the risk right now is that the rupee may trade below 280 per dollar, which could destabilise export-based industries, whereas a mild depreciation would be the right way forward,” said Faisal Mamsa, CEO of Tresmark.

During the current fiscal year, the rupee has appreciated gradually, with more noticeable gains since July 31, when the dollar hit its peak for the year. On July 31, the dollar was traded at Rs284.27, compared to Rs280.42 on the last trading day of the outgoing week.

One dealer noted that the US dollar has already lost about 12 per cent against major international currencies, arguing that the rupee had effectively helped the dollar remain relatively strong and stable in the local market.

Exports, however, have been declining. They fell 15.4pc in November, swelling the trade deficit for the first five months of FY26 to $37.2bn and putting pressure on the current account.

The market has been rife with speculation that the government is under pressure to devalue the rupee to support exporters, but the currency’s gradual appreciation has dismissed such perceptions.

“Yes, the calls for a weaker rupee have grown louder. You hear the usual arguments: global demand is soft, INR (the Indian rupee) drifting towards 90 per dollar, exporters cannot price orders due to high costs, and a correction will magically ‘fix competitiveness’,” Mr Mamsa said.

The rupee had collapsed from 180 to 300 against the dollar in just two years — one of the sharpest devaluations in the region. But there was no meaningful export boom, no import compression beyond what the SBP manually enforced and no structural improvement.

“A few publications this week are again glorifying REER (Real Effective Exchange Rate) and implying that a weaker rupee is somehow ‘necessary’. It’s a familiar narrative: REER goes above 100, currency is ‘overvalued’, therefore devalue it. It’s an incomplete way to look at a modern FX (foreign exchange) market,” Mr Mamsa said.

Currency experts also pointed out that the IMF has not treated REER as a primary barometer for the exchange rate since 2018, but exporters continue to exert political pressure for devaluation to shore up margins.

Published in Dawn, December 7th, 2025