Rupee Up 5th Day in a Row Against US Dollar, Drops Against AUD, EUR, GBP

The Pakistani rupee (PKR) moved higher and posted gains against the dollar during interbank trade on Monday, rising as high as 260.825 against the greenback.

At close, the rupee appreciated by 0.36 percent and suspended movement at 261.88 after gaining 93 paisas against the greenback.

The local unit was all green against the dollar and opened trade at 261 in the open market. By midday, the greenback went higher against the rupee to around 262. After 1 PM, the local unit was largely green against the top foreign currency before the interbank close.

The rupee is still down over Rs. 26 since its record-breaking single-day drop of Rs. 25 in the last week of January after the currency was finally ‘freed’ against the US dollar in the inter-bank market. As per market trends and fiscal developments observed today, the PKR has managed to gain almost Rs. 1 today.

According to Tresmark, there will surely be some outruns to levels below 260. These outruns are not expected to stay beyond the 2-week time frame. The two key reasons for this view are that SBP is still holding off imports and new LC issuance, to the detriment of industries and the IMF, and sooner than later they will have to resume near-normal operations. The other reason is that SBP is buying the excess dollars off the market and they will have to support the market at some level to optimize maximum mop-ups.

After enduring the worst week in which the Rupee traded as low as 278.50/$ (intraday), it displayed a remarkable resurgence, making an intraday high of 262.25/$ yesterday. One key factor to this reversal was SBP’s circular which effectively discourages exporters from parking their forex outside Pakistan beyond the stipulated time.

Money changers say a policy rate hike is imminent in the coming days. The majority of traders have placed their bets on a 200 bps increase, especially with the current inflation trend and further upticks due to the tax, fuel, and energy prices hike.

The PKR was bearish against most of the other major currencies in the interbank market today. It gained 36 paisas against the Euro (EUR), Rs. 1.50 against the Australian Dollar (AUD), and Rs. 2.16 against the Pound Sterling (GBP).

Conversely, it held out against the Canadian Dollar (CAD), gained 42 paisas against the Saudi Riyal (SAR), and 42 paisas against the UAE Dirham (AED) in today’s interbank currency market.