The rupee appreciated by Rs4.43 against the US dollar in the interbank market on Tuesday after hitting a record low last weekend. The local currency was changing hands at Rs265.2 per dollar in the interbank around midday today, that’s up by1.64pc from yesterday’s close of Rs269.63.
Export Proceeds & Unofficial Dollar Cap
Komal Mansoor, Tresmark’s Head of Strategy said the rupee’s gain could be attributed to exporters offloading some of their proceeds.
Khurram Schehzad, CEO Alpha Beta Core observes that remittances and export proceeds had started pouring in days after the government removed an unofficial cap on the USD-PKR exchange rate.
The IMF delegation’s arrival in the country for discussions on the ninth review may also have restored some confidence.
The PKR lost Rs38.74 between Jan 26-30, with a record i/b fall of Rs24.54 in a single day on Thursday, following the price cap removal.
The market experts and traders had however welcomed the move earlier, terming the slide a “much-needed adjustment”. They had viewed that rupee after dipping will adjust itself by market mechanism
Ismail Iqbal Securities, cited the dip largest single-day depreciation in both absolute and percentage terms since the introduction of new exchange rate system in 1999.
Price Cap on exchange Rate
The removal of the cap resulted in the interbank and open markets aligning more closely. Currency dealers now expect a black market in dollars to eventually dry up.
The government’s decision to remove the price cap came in wake of country’s worsening economic situation. The condition of economy resulted from servicing endless external debts and battling rising inflation.
The price cap removal on the exchange rate was one of the IMF preconditions for reviving the ninth review talks.
IMF mission chief for Pakistan Nathan Porter had already arrived in Islamabad to start a technical discussion with authorities.
The second phase of policy negotiations would continue till Feb 9 to finalize a memorandum of economic and financial policies (MEFP).