The Pakistan rupee has enjoyed a month-long winning streak against the US dollar, with the local currency gaining 23.50 against the greenback since September 5 in the interbank market. This positive trend can be attributed to a military-backed crackdown against currency smugglers. Currently, the Pakistani rupee stands at 283.60 per dollar in the interbank market, marking a further 1.8 gain against the US dollar.
On September 5, the Pakistani rupee had experienced a significant decline, reaching 307.10 against the dollar in the interbank market. However, since the crackdown on currency smugglers, hoarders, and speculators, the rupee has been on a path to recovery.
In the recent past, the rupee closed at 284.68 to the dollar, demonstrating a 0.37% increase compared to the previous day’s closing rate of 285.72.
Financial analysts believe that the rupee’s value has been on the rise due to a decrease in the demand for dollars in the black market. According to Samiullah Tariq, the head of research at Pak-Kuwait Investment Company, the appreciation of the PKR against the dollar can be attributed to the disappearance of illegal demand following the crackdown. Tariq predicts that in the coming days, the rupee could strengthen further to reach 280 rupees per dollar.
Mustafa Mustansir, the head of research at Taurus Securities, identifies the crackdown on grey markets and illegal hoarding of dollars as the primary reasons behind the rupee’s increased value. Additionally, the illegal flow of dollars to Afghanistan has likely ceased. The restructuring of the exchange companies sector by the State Bank of Pakistan (SBP) has also played a significant role, leading to a substantial selling of dollars in the open market. Mustansir expects this positive trend to continue.
While the rupee’s near-term outlook remains positive, its medium-term trajectory will depend on the country’s economic fundamentals, particularly the outcome of the International Monetary Fund’s (IMF) review of the stand-by arrangement (SBA) and the status of foreign exchange reserves. An IMF review is anticipated in late October or early November 2023, which could further impact the rupee’s performance.
