Pakistan Rupee appreciates by Rs7 against US Dollar in open market

KARACHI: In the open market, the Pakistani rupee continued its upward trajectory against the US dollar, reaching 318 during Wednesday’s trading session. This development has led to a further reduction in the disparity between the open-market and inter-bank exchange rates.

Dealers reported that the rupee was quoted at 318 for selling and 315 for buying purposes in the open market, marking a Rs7 decline from Tuesday’s levels of 325 (selling) and 322 (buying). The Exchange Companies Association of Pakistan (ECAP) also provided rates at Rs313 (selling) and Rs316 (buying) during trading.

In contrast, the inter-bank market witnessed relative stability, with the rupee hovering around the 307 level against the US dollar.

Market speculations indicate that the open-market exchange rate might dip below 300, with the inter-bank rate following suit. A dealer commented, “Market noise suggests the currency may fall below 300 level in the open market, and the inter-bank would follow soon.”

Pakistani Rupee shows signs of recovery in the open market

Experts attribute this halt in the currency’s decline in the open market to a recent meeting between Chief of Army Staff (COAS) Asim Munir and the business community held on Sunday. During this meeting, the army chief discussed the government’s economic plans and efforts to combat smuggling and speculative activities.

Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited, remarked, “The appreciation is being driven by the COAS meeting, under which issues pertaining to US dollar smuggling were discussed. Customers who have been holding dollars are now selling it in the open market. However, the real issue is improvement in dollar inflows, which is a long-term solution. Administrative measures can control the exchange rate in the open market, but controlling it in the inter-bank would require dollar inflows.”

Furthermore, law enforcement personnel have been deployed at exchange companies to monitor dollar trading activities.

It’s worth noting that under the International Monetary Fund (IMF) program, the exchange rate gap between the inter-bank and open markets, referred to as the premium in the IMF’s country report on Pakistan published after the Stand-By Arrangement’s approval by the Executive Board, is expected to be around 1.25%.

Concerns over rising imports as restrictions ease, a widening current account deficit, and falling foreign exchange reserves have continued to exert pressure on the Pakistani rupee.