The PKR recovered slightly on Thursday, appreciating by 15 paisas against the dollar in the interbank market, with analysts attributing the gains to the State Bank of Pakistan (SBP) receiving a much-needed $1.16 billion deposit from the International Monetary Fund (IMF).
The local currency was being traded at Rs217.25 per dollar after appreciating 0.68 per cent by 9:49am, according to data shared by the Forex Association of Pakistan (FAP). However, by the day’s end, the PKR shed most of its gains and closed at Rs218.6 per dollar, up 0.07pc. FAP Chairman Malik Bostan said the market sentiment would become more favourable after the IMF’s deposit and the rupee would gain sharply against the dollar.
He said the difference in rates between the interbank and open markets had not only ended but the dollar was being sold at lower rates in the latter. “Those who were holding on to dollars are constantly selling them in the open market now following the rupee’s gains, due to which the rates in it are lower,” he elaborated. The market expected dollar inflows to increase as a result of the aid being given for flood relief, and money from friendly countries to be received soon, due to which the rupee would further improve, he added. “The rupee can improve to less than Rs200 per dollar.”
Mettis Global Director Saad bin Naseer agreed with Bostan’s view, saying the rupee’s gains today could be attributed to the IMF’s $1.2bn deposit with the SBP. “With IMF programme in place, rupee will [likely] gain against the dollar as outlook for dollar inflows has improved. Furthermore, remittances are expected to swell in coming months in view of the floods across the country.
“On the demand front, the economic activity is slowing down as seen by plant shutdowns announced by auto assemblers and steel producers. This will likely keep imports and demand in check as production across sectors continues to decline,” Naseer added. Tresmark’s Head of Research Komal Mansoor said the IMF tranche had finally relieved the pressure on the rupee and the country would be able to mobilise further funding from bilateral, multilateral and other sources to bolster foreign reserves. “However, focus is now on inflation which is expected to clock in higher than 26pc for Aug and increase in the policy rate,” she cautioned.
State Bank of Pakistan on Thursday injected Rs 150 billion into the money market as reverse repo purchase through Its Open Market Operation. The rate of return accepted is 15.25 percent per annum.