The Pakistani rupee (PKR) reversed losses against the dollar during interbank trade on Wednesday, rising as high as 271.5 against the greenback as talks with the International Monetary Fund (IMF) draw to a close later this week.
At close, the rupee appreciated by 1.08 percent and suspended movement at 273.33 after gaining Rs. 2.95 against the greenback.
The local unit was largely bullish against the greenback and opened trade at 275. in the open market. By midday, the greenback lowered higher against the rupee to as high as 276. After 1 PM, the local unit moved higher against the top foreign currency before the interbank close.
The rupee has been the worst-performing currency in the region whereas countries like Afghanistan have had perhaps one of the world’s best-performing currencies since last year. The Afghan Afghani (AFN) has gained about 7 percent against the US dollar since Monday this week. After reaching an all-time low of 124.18 in December 2021, a few months after the Taliban reclaimed power, the AFN has recovered to around 89.96 per dollar. Meanwhile, the PKR has dropped to roughly four times that of AFN to 275.3 against the greenback.
After months of artificially managing the exchange rate, the government finally caved into IMF’s key pre-condition to resume talks allowing PKR to float freely in late January. This led to PKR depreciating a cumulative 17 percent since 25 January 2023 with PKR remaining volatile as FX reserves continue to hit new lows.
Given the ongoing talks with the IMF until February 9 and negotiations on major fiscal reforms, analysts believe the PKR will continue to remain volatile in the short term stabilizing as the IMF review concludes and other bilateral and multilateral flows start pouring in. Given the significant deterioration in external reserves position and repayments of more than USD 2bn of commercial debt previously anticipated to be rolled over, they forecast June/December 23 PKR/USD closing rates of 275 and 290, respectively.
The rupee is still down over Rs. 42 since its record-breaking single-day drop of Rs. 25 in the last week of January after the currency was finally ‘freed’ against the US dollar in the inter-bank market. As per market trends and fiscal developments observed today, the PKR has managed to gain almost Rs. 3 today.
The PKR was bullish against most of the other major currencies in the interbank market today. It gained 51 paisas against the Australian Dollar (AUD), 78 paisas against the Saudi Riyal (SAR), 80 paisas against the UAE Dirham (AED), Rs. 1.36 against the Canadian Dollar (CAD), and Rs. 1.51 against the Pound Sterling (GBP).
Moreover, it gained Rs. 2.50 against the Euro (EUR) in today’s interbank currency market.
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