Rupee remains stable against dollar as foreign exchange reserves improve

The Pakistani rupee remained largely stable against the US dollar in the interbank market on Friday, supported by a balance

KARACHI: The Pakistani rupee remained largely stable against the US dollar in the interbank market on Friday, supported by a balance between foreign currency inflows and outflows and improving foreign exchange reserves.

The rupee closed at Rs277.16 against the dollar, compared with Rs277.17 at the end of the previous trading session, showing only a marginal movement in the exchange rate.

In the open market, the local currency also remained unchanged, with the dollar trading at around Rs279.20. Currency dealers attributed the stability to relatively balanced demand and supply conditions in the foreign exchange market.

According to market participants, the rupee continued to receive support from improving external-sector indicators and a gradual strengthening of the country’s foreign exchange position. The buildup in reserves has also helped improve market sentiment and provided additional support to the local currency.

Pakistan’s external account position has shown signs of improvement in recent months. According to a note issued by Chase Securities, the country’s current account deficit narrowed to $98 million in August. However, the cumulative current account deficit during the first two months of the ongoing fiscal year stood at $543 million.

Analysts said developments in the external sector would remain important for the stability of the rupee, particularly as Pakistan continues to manage its foreign exchange requirements and debt obligations.

The country’s foreign exchange reserves have also received a significant boost. According to Chase Securities, the latest increase in reserves was supported by the government’s recent $3 billion Eurobond issuance as well as dollar purchases made by the State Bank of Pakistan (SBP).

As a result, Pakistan’s total liquid foreign exchange reserves have risen to around $26.8 billion, providing the country with more than three months of import cover. The increase in reserves is considered an important indicator of the country’s ability to meet external payment obligations and manage pressure in the foreign exchange market.

The improved reserve position has also helped strengthen confidence in the domestic currency. Market participants are closely monitoring whether the current trend in reserves and foreign exchange flows can be maintained in the coming months.

Meanwhile, the ongoing review under Pakistan’s International Monetary Fund (IMF) programme remains a key development for the country’s external account and financial markets.

According to Chase Securities, successful completion of the IMF review could potentially unlock around $1.2 billion in additional financing. The release of these funds would provide further support to Pakistan’s foreign exchange reserves and could help ease pressure on the country’s external financing position.

For now, the rupee continues to trade within a relatively narrow range against the dollar, with dealers keeping a close watch on foreign currency inflows, import demand, remittances, reserve accumulation and developments under the IMF programme.

Market participants are expected to closely monitor upcoming economic data and official announcements to assess the direction of the rupee and the broader foreign exchange market.