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PKR continues its winning streak and gains by RS1.84 in interbank

Tuesday’s early interbank trade saw the PKR increase by Rs1.84 against the dollar, the ninth session in a row that it has done so.

The Forex Association of Pakistan reported that at 9:42 am local time, the exchange rate was Rs225.45 to $1. (FAP). This represents a rise of 0.81 percent from the close of Rs227.29 yesterday.

In the previous seven sessions, the PKR gained Rs12.42, or 5.35 percent, against the US dollar.

Exchange rate swings in Pakistan, according to Saad bin Naseer, director of financial data and analytics portal Mettis Global, were influenced more by feelings than by economic realities.

Fundamentals haven’t changed, but perception has, which was critical at this key moment.

Naseer claimed that with better administration and stringent enforcement, the rupee’s value might be increased to 200 to the dollar. However, he went on to say that when “driving the exchange rate to a desirable level,” variables like the real effective exchange rate and current account deficit should be taken into account.

He argued that the government needed to make sure that traders would be held accountable without delay.

The dollar’s value had been “artificially boosted,” according to FAP Chairman Malik Bostan, and was now falling as a result of the government’s stringent oversight. In the upcoming days, he anticipated further rupee appreciation on the interbank market.

Bostan also pointed out that after reaching a 49-year high in August, inflation dropped to 23.18 percent in September. He explained that rather than tightening monetary policy, which may strengthen the currency, the central bank was anticipated to keep or lower the interest rate.

According to the FAP chairperson, the market also anticipated that the International Monetary Fund (IMF) will relax requirements under the current programme in light of the terrible floods, which would assist the PKR gain strength.

The rupee should be priced at less than Rs200 versus the dollar, according to Finance Minister Ishaq Dar, who made this claim a day earlier.

Because the Pakistani rupee is currently undervalued relative to the US dollar, its true value is less than $200.

Currency analysts worry that any artificial exchange rate will ultimately harm the economy, as was seen when the same finance minister devalued the rupee below Rs100 during his tenure from 2013 to 2018. The weaker currency boosted imports, which led to a massive trade deficit and left his government with a $20 billion current account deficit, which was unprecedented.

Khurram Schehzad, CEO of Alpha Beta Core, advised the finance minister in an interview with today that he “should not talk about setting currency parity, or at least not openly,” as the State Bank of Pakistan had the authority to do so and the government had promised the IMF that the finance ministry would not meddle in the central bank’s affairs.

Instead, he suggested that the SBP be held responsible for “reaching a realistic currency parity (in line with fundamentals) as well as taming inflation (demand side), while managing supply side disruptions via a detailed plan (farm to market management with essential imports in time)”.

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