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PKR vs dollar: Rupee likely to maintain upward trend against greenback

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12 months ago

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  • Currency increases by 1.43% or Rs4.31 against dollar.
  • Demand for dollars in parallel or unofficial market drops.
  • Tens of millions of dollars return into interbank, open markets.

KARACHI: As markets enjoy a surge in export earnings and remittance inflows after the government cracked down on speculative activity, the rupee is set to continue its upward trend against the US dollar, The News reported Sunday.

The rupee closed at 301.16/dollar on Monday, but gained strength and finished at 296.85 on Friday. 

In the five sessions this week, the currency increased against the dollar by 1.43% or Rs4.31 as the demand for dollars in the parallel or unofficial market dropped.

According to Tresmark, a financial technology company, in a note on Saturday: “Liquidity has improved in the forex market as exporters were selling in ready as well as in forwards with good volumes and also due to uptick in daily remittances, and due to this rupee will continue to strengthen gradually.” 

The current account deficit, which measures the gap between foreign exchange inflows and outflows, narrowed by 79% month-on-month to $160 million in August, as a result of improvement across all four heads: trade, services, primary and secondary income.

The regulatory measures aimed at curbing illegal activities in the foreign exchange market have begun to yield results. This has helped in narrowing the gap between the interbank and open market exchange rates. Therefore, the remittances have started improving.

Since the start of the raids on black market operators on September 6, traders claim that tens of millions of dollars have come back into Pakistan’s interbank and open markets.

The rupee, which hit a record low on September 5, surged more than 10% from levels seen before the crackdown, recovering to trade for less than $300/dollar last week.

However, the rupee also faced some pressure from the lifting of import restrictions, which increased the demand for foreign currency. In August, it lost value against the dollar by almost 6%.

“In last 30 years, rupee has depreciated by 7% a year on an average against US dollar,” Topline Securities, a brokerage firm, said in a report. 

“But the last 6 years were really bad in which rupee has fallen on an average by 15% a year,” it added.

Tresmark said the SBP’s decision to maintain the policy rate at 22% on Thursday can be interpreted as the nature of current economic ills is not demand-driven. There are supply-side issues, fiscal mismanagement and speculative trends. 

Increasing rates would not impact demand (which is already low) and would not have unlocked supply as more hoarders, speculative buyers and people with black money are immune to higher rates as they usually keep in current accounts or in cash.

“Whereas the government expenses go up meteorically (being the largest borrower) and in a vicious cycle impact inflation,” it said. “Interest rates are at their highest in Pakistan’s history anyway, so taking administrative measures was really the more practical way out.”

However, it also warned that the reversal in commodity prices is still slower than desired and that the border with Afghanistan is still porous and activities continue. 

“So expect higher volumes of imports (which are required to smoothen supply) to keep a check on rupee parity. As a result, rates may not come down below 285/$ (July end levels) and should consolidate at the 290-295 levels,” it said.

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It is anticipated that 150 ships would arrive at Gwadar by the year 2045, allowing the port to handle fifty percent of all imports.

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3 days ago

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In an effort to strengthen the port’s economic importance, the Federal Government has made the decision to direct fifty percent of all imports from the public sector to Gwadar Port.

By taking this action, which has the backing of the Special Investment Facilitation Council, the port’s financial situation is going to be improved.

The Cabinet will be presented with a summary of imports through Gwadar by the Ministry of Maritime Affairs, which will take place after Prime Minister Shehbaz Sharif’s recent trip to China.

When the next Cabinet Meeting takes place, Ahsan Iqbal, the Federal Minister for Planning, Development, and Special Initiatives, will examine the Chinese offer for the Karachi to Hyderabad Section of the ML-1 Project and bring it to the Cabinet.

Company preparations for the Shanghai International Import Expo, which will take place in November 2024, are being made by the Board of Investment and the Ministry of Commerce of Pakistan.

One of the most important aspects of the China-Pakistan Economic Corridor is the Gwadar port, which serves as a significant commerce route connecting China, the Middle East, Africa, and Europe. At this time, the Gwadar Port is able to accommodate two huge ships, and by the year 2045, it is anticipated that it would be able to handle up to 150 ships.

By developing the Gwadar Port, regional connectivity would be improved, employment will be created, and international investment will be attracted.

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The price of gold in Pakistan has experienced a significant surge.

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3 days ago

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Gold prices in Pakistan surged significantly on Thursday following two consecutive days of decline, with the price per tola rising by Rs2,000 to reach Rs262,100. This increase was in accordance with the downward trend in international market values.

The All-Pakistan Gems and Jewellers Sarafa Association (APGJSA) reported that the price of 10 grams of 24-karat gold rose by Rs1,714, reaching Rs224,708.

Conversely, the world gold market experienced an upward trajectory. According to the APGJSA, the global price of gold surged to $2,503 per ounce following a $22 gain during the trading session.

The local market experienced a significant decline in silver prices, decreasing from Rs50 to Rs2,900 per tola after a prolonged period.

The local market’s gold prices remain subject to the ever-changing dynamics of the international market, as well as domestic considerations such as currency exchange rates and domestic demand.

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The government has not met the deadline set by the International Monetary Fund (IMF) for the approval of a $7 billion loan.

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4 days ago

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On Tuesday night, there were virtual talks between representatives of the Finance Ministry and the IMF delegation, with the main topics being external finance and income generation.

According to people familiar with the situation, no date has been set for the IMF’s Executive Board to approve the loan despite the ongoing negotiations.

Officials from the Finance Ministry informed the IMF mission about the government’s initiatives to get outside funding during the discussions. Updates on loan rollovers and fresh finance commitments from allies were included in this. According to sources, the IMF has received a schedule, and loan rollovers are expected to be finished by the end of next week.

The $12 billion in debt must be rolled over before the loan can be approved by the Executive Board, according to the IMF mission.

In the virtual discussions, representatives of the Federal Board of Revenue (FBR) conversed with the IMF team over the revenue deficit. The FBR must reach its revenue goals for this month, according to the IMF mission. As a result, the IMF has asked the FBR to submit a thorough strategy outlining how it will close the gap left by the shortfall and guarantee that revenue goals are reached.

Apart from the conversations on outside funding, there are rumors that the Finance Ministry is actively holding talks with commercial banks in order to obtain new funding. According to reports, negotiations are taking place with four distinct sources for commercial loans, which are anticipated to support the government’s overall financial plan.

Finance Minister Muhammad Aurangzeb disclosed on Tuesday that the IMF was in favor of introducing targeted subsidies. He said that qualifying recipients might receive these subsidies through the Benazir Income Support Programme (BISP).

In order to guarantee consistency, the minister announced that this week’s talks with chief ministers will focus on implementing a similar policy across the country. He was having a casual conversation in parliament with the journalists.

In response to queries about outside funding, Aurangzeb revealed a $2 billion deficit and said that talks to close this gap are progressing. He stressed how crucial it is to obtain business loans.

He went on, “At this point, there’s a need to secure an agreement for commercial loans, not exactly their issuance,” emphasizing that debt rollover negotiations are nearing their conclusion and doing well. The minister expected that these developments would shortly be reported to the governments of allied countries by relevant authorities.

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