The Pakistani rupee extended its gains against the USD by 3.32 in the interbank market on Tuesday.
The local currency is trading at Rs233.7 per dollar, which is a 1.4% increase from yesterday’s close of Rs237.02,(FAP).
Tresmark’s Head of Research, Komal Mansoor, said that the exchange rate had been left at the whims of emotions.
The “Dar-jolt” has caused a strengthening in the Pakistani rupee’s value, but the underlying weakness remains. More and more countries are waging a reverse currency war to strengthen their currencies against the strong US dollar.
“First, ever since 24 years, Japan intervened to strengthen the yen. India has spent $90 billion in supporting its stable currency. However, with scarce resources in throwing dollars into the market where it would originally cause a devaluation, the SBP uses subtle interventions. The government needs to be more vocal and assertive with creditors and lenders. So that Pakistan does not get caught up in this vicious cycle of instability.”
Several currency dealers expressed happiness at Dar taking over as Finance Minister, expecting him to bring down the dollar rates he had been able to do before.
When the finance minister Dar was in office, the rupee-dollar parity was 100.
But officials and analysts said that Dar would not affect the rupee this time because of two reasons. The International Monetary Fund (IMF) will not allow keeping up an artificial exchange rate in a situation where the appreciation of the rupee would badly damage exports.
Actions Cause Rise in Rupee’s Value
With international lenders, like the World Bank and Asian Development Bank giving assurances of funds after floods and expectations of lower import bills, the rupee stabilized significantly.
The State Bank of Pakistan’s strict action against the people involved in speculations. According to the official, also led to a rise in the rupee’s value on the interbank market.
This is because of a mixed market expectation, as friendly countries promise to give $4 billion after the IMF’s deposit was received but have yet to do so. This could result in a drastic improvement of the exchange rate to less than Rs230 per dollar.
There’s an expectation that after Ishaq Dar becomes finance minister, he will come up with a mechanism to prevent daily fluctuations in the dollar’s rate.
The rupee made a six-paise gain on Friday, snapping a 15-session rally for the dollar. This week, the PKR surged by 1.1% in the opening session.
