The Pakistani rupee appreciated 0.9% on Monday in the interbank market, recording significant gains against the US dollar.
In intraday trading, the rupee appreciated by Rs1.97 to 220.50 at around 12:55 p.m. against the US dollar.
The rupee lost 0.73% of its value against the US dollar over the past week, but what really got official circles talking was the reported shortage on the open market and Imran Khan’s announcement of a long march.
The rupee suffered three consecutive losses to close at 222.47 against the US dollar in the inter-bank market after back-to-back gains on Monday and Tuesday.
Ishaq Dar, the federal minister of finance and revenue, announced on Saturday that the government has started making efforts to control volatility and maintain the exchange rate at its real value.
Dar issued a warning that those institutions found to be engaging in illegal practices would face harsh punishment. He sternly ordered banks and ECs to abstain from dollar manipulation.
The exchange rate is crucial to the future trajectory of inflation, according to the Ministry of Finance’s Economic Update and Outlook for October 2022.
“Moderating inflation also helps to keep exchange rates stable, which is a good scenario that could lead to a beneficial inflation-exchange rate cycle. Furthermore, strong economic fundamentals are necessary for exchange rate stability. A manageable current account deficit and guaranteed financing of this deficit by healthy financial inflows are also necessary in addition to inflation. Speculative bubbles in the exchange market would be extremely unlikely once markets became convinced of these prospects, the report stated.
Globally, the US dollar strengthened on Monday as solid consumer spending data revealed ongoing underlying inflation pressure, reducing speculation that the US Federal Reserve would be slowing down its aggressive campaign to tighten monetary policy.
The US dollar index strengthened to 110.81 against a basket of currencies, moving further away from a one-month low of 109.53 reached last week.
Oil prices, a crucial metric for measuring currency parity, fell on Monday due to worries that expanding COVID-19 restrictions in China will reduce demand, which counteracted indications that output at the largest US shale field is slowing down.
