April 02, 2021(MLN): With a new wave of COVID-19, economies are trying to recover from the financial crisis amid progressive rollout vaccine, fearing higher inflation prints and weak currencies. However, the Pakistani Rupee (PKR) led the chart of the world’s best-performing currencies in the first three months of CY21 as it closed on a stronger note with an appreciation of 4.43% against the US Dollars (USD).
PKR reached its 22-month high levels by March 31, 2021 at PKR 152.76 against the USD, currency watchers are consistently wondering if this trend is likely to continue going forward in the remainder of FY21.
This brings the FY21 to-date average parity to 162.04/USD compared to 156.59/USD (3.48% YoY depreciation) from last year's same period. Although, as per the research report by Arif Habib Limited, the PKR still inherits a depreciation bias in the long-term but in the short term it is expected Rupee strengthening to continue.
The pair USD-PKR moved up with a delta of Rs 15.29 per dollar or an appreciation of 9.1% during 9MFY21 while it depreciated by 4.16% in the corresponding period of FY20, as per data compiled by Mettis Global.
During July-Mar FY21, the domestic unit has gained 9.31% when compared to a low of Rs 168.44, a level seen on Aug 26, 2021.
This appreciation is attributable to improved macro fundamentals along with attempts by the State Bank of Pakistan (SBP) to curb market speculation and hence, helping in subsiding Pakistan’s macroeconomic risks. The factors that primarily contributed rupee to maintain strong upbeat momentum against the greenback include; the current account surplus of $881 million during Jul-Feb FY21 compared with a deficit of USD 2,741 million during the same period last year, saving in FX spending on foreign tours, Umrah and Hajj, and Inflow of Dollars in the open market. The surplus during the said period was emanated from unprecedented inflows of remittances that clocked in at $18.74 (up by 24% YoY).
Also, the State Bank of Pakistan (SBP) increased its FX dealing monitoring, imposed limits on imports and a condition of prior approvals for imports once the parity touched a high of 160.80 against USD at the start of CY21.
Further, Roshan Digital Account (RDA), a major new initiative taken by the State Bank of Pakistan, in collaboration with commercial banks operating in Pakistan has so far-fetched nearly USD 806 million in just over seven months of its launch. This momentum is expected to continue in the coming months too which will further augment the FOREX position of the country.
All this resulted in an overall improved FX reserves position which reached USD 20.84 billion (as of March 26, 2021), from USD 18.9 billion as of Jun’20, an increase of almost USD 1.94 billion, including an IMF tranche of $499 million that provided the much-needed buffer to ward off abrupt changes in the country’s external account profile.
The USD Index is considered an indication of the dollar’s value in global markets. It has fallen by 4.2% during the ongoing fiscal year 2021. This weakening of the dollar index is another reason for the rupee to strengthen against the USD, said Sana Taufiq, Research Analyst, at AHL.
Today, PKR depreciated by 26 paisa against USD in the interbank session as the currency closed the trade at PKR 153.55 per USD, against yesterday's closing of PKR 153.3 per USD.
At the interbank forex market, the domestic unit opened at 153.20/154.20 per USD. The rupee traded within a very narrow range of 69 paisa per USD, registering an intraday high bid of 153.60 and an intraday Low offer of 153.00.
During the week, the currency has gained 1 rupee against the greenback, as the previous week was concluded at PKR 154.59 per USD.
So far, PKR has logged by Rs 14.50 or 9.44% gain in FY21 while appreciation has been Rs 3.58 or 4.09% in CY21.
Meanwhile, the currency lost 1.3 rupees to the Pound Sterling as the day's closing quote stood at PKR 212.51 per GBP, while the previous session closed at PKR 211.25 per GBP.
Similarly, PKR's value weakened by 97 paisa against EUR which closed at PKR 180.86 at the interbank today.
On another note, within the money market, the State Bank of Pakistan (SBP) conducted an Open Market Operation in which it injected Rs.1658.45 billion for 7 days at 7.04 percent.
The overnight repo rate towards the close of the session was 7.10/7.25 percent, whereas the 1-week rate was 7.05/7.15 percent.
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