KARACHI:
Pakistani currency, which began its ascend with the crackdown on smugglers and gradual economic recovery, on Friday created history by maintaining its winning streak for 27 consecutive working days for the first time in three years.
It hit over three-month high below Rs278 against the US dollar in inter-bank market.
Talking to The Express Tribune, Arif Habib Limited Economist Sana Tawfik projected that the rupee would maintain the winning streak in the short run, going up to Rs260-265 against the greenback.
It, however, may return to the downward trend in November-December and lose ground to Rs290-300 by December 31, 2023, she said.
According to State Bank of Pakistan’s (SBP) data, the rupee booked fresh gains of 0.35%, or Rs0.96, and closed at Rs277.62/$ on Friday.
In the past 27 working days, the currency has cumulatively regained 10.62%, or Rs29.48, compared to the record low of Rs307.10/$ hit on September 5, 2023.
The rupee appreciation is expected to pull down inflation rate in the country through a significant reduction in petroleum product prices in mid-October.
Tawfik said that the robust rupee rally was expected to continue with fresh support coming from the latest statement by the central bank governor at a meeting with foreign investors. He said that the SBP had achieved all the IMF’s September-end targets including the targets for net international reserves (NIR) and net domestic assets (NDA).
The statement suggests that Pakistan will smoothly pass the first IMF review under the $3 billion loan programme in November and will get a second tranche of $700 million.
Before that, Pakistan’s current account balance is expected to achieve surplus for September compared to deficit in previous months or it will reach breakeven. The likely development would support positive sentiment in currency markets, Tawfik said.
She recalled that the 27-day-long historic rupee rally began with the crackdown on currency smugglers and hoarders. The government action forced exporters to sell their dollar proceeds in inter-bank market as they believed that the currency would appreciate to Rs250-260/$ in the ongoing spell.
The crackdown also forced many overseas Pakistanis to send remittances through official channels, which improved inflows as well as stabilised foreign exchange reserves.
Earlier, they withheld remittances on expectations of further rupee depreciation and fetching more rupees in exchange for foreign currencies.
In open market, the currency rose 0.36%, or Rs1, and closed at Rs277/$ on Friday, according to the Exchange Companies Association of Pakistan.
With this, the currency has cumulatively gained 18.41%, or Rs51, in over one month in retail market.
Tawfik cautioned that the rupee may come under pressure in November and December when imports were expected to rise over projection of a reduction in the central bank’s policy rate.
The SBP may make a token rate cut in the January 2024 monetary policy. The policy rate is expected to decrease to 17-19% by the end of June 2024 compared to the existing record high rate of 22%.
Exporters have continued to make panic selling of dollars on the outlook that the rupee will appreciate to Rs250-260/$ under the current spell. On the other hand, importers are not buying dollars and are waiting for the rally to settle down.
More interestingly, some exporters are believed to have made forward sales of dollars without having physical positions and they will also buy the greenback when the current rally comes to an end.
Published in The Express Tribune, October 14th, 2023.
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