Pakistani Rupee's unbeaten streak reaches 10 weeks against USD

January 20, 2024 (MLN): The Pakistani rupee (PKR) sustained its upward momentum this week and gained a marginal 46 paisa to settle at PKR 279.9, as compared to the previous week's closing of PKR 280.36 per USD.

It is crucial to note that the home unit has extended its winning streak against the mighty Dollar for the tenth consecutive week.

The stability arises from improved macroeconomic conditions in the form of increased liquidity in the foreign exchange market due to tighter enforcement of regulations, a shrinking money supply, a balance of payments surplus on account of low import demand, and a moratorium on Chinese debt repayments.

Market sentiments received a positive boost following the country receiving the second installment of SDR 528 million, equivalent to $705.6 million from the International Monetary Fund (IMF).

Another key development that took place during the week was the release of favorable economic data that signaled stability and improvement in the economic indicators.

The PKR's Real Effective Exchange Rate Index (REER) increased by 0.6% MoM in December 2023 to a provisional value of 98.86 from the revised value of 98.28 in November 2023.

Additionally, Pakistan recorded a current account surplus of $397m largely due to a decline in imports and an increase in exports.

Moreover, the cash-strapped nation attracted substantial foreign investments worth $243m in December, a 56% increase from the previous month and the highest level in a year.

However, according to the IMF, while economic activity has stabilized, the outlook remains challenging and dependent on the implementation of sound policies.

During the week, the State Bank of Pakistan (SBP) conducted the auction of fixed-rate Pakistan Investment Bonds (PIBs) in which a decline of up to 50bps was witnessed in yields.

Market participants have raised their bets for a fall in interest rates in the coming months as they anticipate that the policy rate has already peaked.

In comparison to major currencies, PKR gained 3.38 rupees against the Euro, closing at 304.47 compared to the previous week's value of 307.85.

The British Pound became cheaper by 3.25 rupees closing at 354.94 compared to 358.18 a week ago.

The Swiss franc saw losses of 6.8 rupees, closing at 322.28 compared to 329.08 from the previous week.

Against the Japanese Yen, PKR gained 4.66 paisa, closing at 1.888 versus 1.934 a week ago.

The Chinese Yuan lost 22.9 paisa, closing at 38.91 against 39.139 from the previous week.

The Saudi Riyal closed at 74.627 with a loss of 12.69 paisa from its value of 74.754 a week ago.

The U.A.E Dirham decreased in value by 12.75 paisa from 76.206 a week ago to 76.333.

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