Brokerage Firm Topline Securities expects the Pakistani Rupee (PKR)/US Dollar (USD) parity in the interbank market to be in the range of Rs. 320-340 by June 2024.
In its PKR outlook report, the brokerage firm highlighted that recent administrative measures have resulted in the PKR gaining value in both the official interbank market and the open market.
The report mentioned that ever since the caretaker government took charge, the PKR came under pressure amid speculation that the non-political caretaker setup might allow the currency to adjust to market forces in line with International Monetary Fund (IMF) instructions. As a result, the PKR fell by 6 percent (from Rs. 288 to Rs. 307) in the interbank market, while it plummeted by 10 percent (from Rs. 296 to Rs. 328) against the USD in the open market from August 14, 2023 to September 4, 2023.
It said that the recent rally in USD after August 14 was mainly driven by the open and black market where the premium (open market vs. interbank rate) increased from 1-2 percent to 6-7 percent.
Considering this trend, the caretaker government, along with the State Bank of Pakistan (SBP), took several measures to cool down the demand in the open market.
As a result of these measures, PKR gained strength over the last 9 working days. In the interbank market, the PKR has appreciated by 4 percent, rising from Rs. 307 to Rs. 296 against the USD. Meanwhile, in the open market, the PKR has increased by 10 percent from Rs. 328 on September 04 to Rs. 298 as of September 18.
PKR has been one of the worst performers in the last few years. It fell 22 percent in 2022 while in 2023 it is down 23 percent so far against USD in spite of recent recovery.
The external financing gap, challenging global financial markets, and local political instability have badly affected foreign exchange reserves (currently less than 2-month import cover) and built pressure on the rupee.
The report said that going forward, in the short run, besides these administrative steps completion of the IMF review due in November 2023 will be an important driver of local currency.
Moreover, Global oil prices, USD inflows from multilateral agencies like the World Bank and Asian Development Bank, timely rollover of maturing loans, and expected FDI in a few sectors will be other factors determining the value of PKR.
Based on a recent poll of key market participants conducted by Topline Research, 38 percent of the participants anticipate PKR/USD parity to range from Rs. 320-340 by June 2024.
Around 25 percent expect it to be around Rs. 340-360 while 21 percent expect it to be around Rs. 300-320. On the other hand, 12 percent expect it to be below Rs. 300, while 5 percent expect it to be above Rs. 360.