Rupee Rises Against US Dollar As REER Spikes Above 100

The Pakistani Rupee (PKR) recovered against the US Dollar (USD) and posted gains during intraday trade today.

It appreciated by 0.12 percent and closed at Rs. 223.69 after gaining 26 paisas against the greenback. The local unit quoted an intraday low of 224.4 against the greenback.

The local unit was stable in the morning against the greenback and opened trade at 224.0 in the open market. By midday, the greenback moved higher against the rupee. After 1 PM, the local unit was bullish and stayed on the 223 level against the top foreign currency before stabilizing at the interbank close.

The rupee reported gains against the US Dollar for the first time in a week today after Pakistan’s Real Effective Exchange Rate (REER) increased by 10.7 percent to 100.4 in October 2022.

Pakistan’s current REER value of 100.4 suggests that exports offer poor returns while imports are cheaper, however, the ongoing liquidity crunch and overall global slowdown due to inflation have all made imports a dismal affair.

Traders recalled Ishaq Dar’s past stint as finance czar when REER climbed above 100, paving way for the PKR to appreciate against the USD. They welcomed today’s close in green but remained wary of exchange rate trends following Monday’s $1 billion Sukuk payment.

Pakistan’s Consumer Price Index-based inflation decreased to 23.84 percent on a year-on-year (YoY) basis in November 2022. On a month-on-month (MoM) basis, it increased to 0.8 percent in November 2022 as compared to an increase of 4.7 percent in the previous month.

Globally, oil rose on Thursday, boosted by investor concerns that OPEC+ will cut supply further at its meeting on Sunday, and as China eased COVID curbs, raising hopes for higher demand in the world’s top crude importer.

Crude rose further, while the US dollar fell after the Federal Reserve Chair hinted at a slowing in the pace of rate hikes. Dollar weakness lowers the price of oil for other currency holders and tends to boost risk assets.

At 4:25 PM, Brent crude surged by $0.71 or 0.82 percent to reach $87.68 per barrel, while the US West Texas Intermediate (WTI) jumped by almost $0.7 to settle at $81.25 per barrel.

Pertinently, both benchmarks have fallen for three weeks in a row, though the market has recovered strongly this week after falling to its lowest level in nearly a year on Monday. Brent then fell to a low of $80.61, its lowest level since January 4.

Oil is finding support from investor optimism that OPEC+ will deliver additional production cuts when they meet.

The PKR was bearish against most of the other major currencies in the interbank market today. It lost 87 paisas against the Euro (EUR), Rs. 1.28 against the Canadian Dollar (CAD), Rs. 1.84 against the Australian Dollar (AUD), and Rs. 2.26 against the Pound Sterling (GBP).

Conversely, it gained seven paisas against the UAE Dirham (AED) and the Saudi Riyal (SAR) in today’s interbank currency market.



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