Rupee Gains 2nd Day in a Row Against US Dollar After FATF Decision

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

It appreciated by 0.20 percent and closed at Rs. 220.41 after gaining 42 paisas against the greenback. The local unit quoted an intraday low of 221.05 against the greenback.

The local unit was stable in the morning against the greenback and resumed trade at 220.70 in the open market. By 10:15 AM, the greenback went as low as 220.68 against the rupee. By midday, the greenback went as high as 221.00 against the rupee. After 1 PM, the local unit recovered marginally but stayed on the 220 level against the top foreign currency before the interbank close.

The rupee gained further against the US Dollar for the second consecutive day today after the Financial Action Task Force (FATF), a global money laundering and terrorism financing watchdog, removed Pakistan from its grey list.

Money changers welcomed the FATF ruling and anticipated fundamentals to thrive but at the same time were cautious of more blood in the money markets after Fitch Ratings last week downgraded Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘B-‘. The demotion came as a surprise since Fitch typically does not assign Outlooks to sovereigns with a rating of ‘CCC+’ or below.

The downgrade reflects further deterioration in Pakistan’s external liquidity and funding conditions and the decline of foreign exchange (FX) reserves. This is partly a result of widespread floods, which will undermine Pakistan’s efforts to rein in twin fiscal and current account deficits. The downgrade also reflects our view of the increased risks of policies potentially undermining Pakistan’s IMF program and official financial support.

Globally, oil fell 2 percent on Monday after data from China showed that demand from the world’s largest crude importer remained subdued in September, owing to strict COVID-19 policies and fuel export restrictions.

Brent crude was down by 0.67 percent at $92.87 down per barrel, while the US West Texas Intermediate (WTI) slipped by 1.01 percent to settle at $84.19 per barrel.

Brent rose last week despite US President Joe Biden’s announcement that the remaining 15 million barrels of oil in the US Strategic Petroleum Reserves would be sold. The transaction is part of a 180 million-barrel release that began in May.

The PKR recovered against some of the other major currencies in the interbank market today. It gained 11 paisas against the UAE Dirham (AED), and  12 paisas against the Saudi Riyal (SAR).

Conversely, it lost 52 paisas against the Euro (EUR), 52 paisas against the Australian Dollar (AUD), 60 paisas against the Canadian Dollar (CAD), and Rs. 2.51 against the Pound Sterling (GBP) in today’s interbank currency market.