The Pakistani rupee continued strengthening against the US dollar, gaining another 0.49 percent during the initial hours of trading in the inter-bank market on Tuesday.
At noon, the rupee was trading at 294.50, marking an increase of Rs1.45 compared to previous levels in the inter-bank market.
However, after maintaining stability on the first day of the week, the Pakistani rupee experienced a decline against the US dollar in the open market on Tuesday.
Currency dealers reported that the rupee was quoted at 300 for selling and 297 for buying in the open market, marking a decrease of Rs3 compared to Monday’s rates.
Despite this dip, the exchange rates remain close to the rupee’s value in the inter-bank market, reducing the premium, which is a significant benchmark for the International Monetary Fund (IMF) program. The government had committed to ensuring that the average premium between the inter-bank and open market rates would not exceed 1.25% during any consecutive 5-business day period.
On Monday, the rupee had strengthened by 0.3 percent, settling at 295.95 in the interbank market.
The recent appreciation of the rupee comes after a period of decline, during which it reached a record low of 307.1 in the inter-bank market. This shift in fortunes is attributed to reforms in the Exchange Companies’ (ECs) sector and increased efforts to curb smuggling, providing support to the currency markets.
These developments offer a slight improvement to the economic outlook, which had been under pressure due to eased import restrictions that led to a widening current account deficit in July.
On the global stage, the US dollar saw some weakening, although it remained near a six-month peak it had reached against major currencies last week, ahead of the Federal Reserve’s interest rate decision scheduled for Wednesday.
Meanwhile, oil prices, a significant indicator of currency dynamics, rose for the fourth consecutive session on Tuesday. Concerns about a supply deficit stemming from extended production cuts by Saudi Arabia and Russia, coupled with weak shale output in the US, contributed to the increase in oil prices.