PKR gains 2 rupees against USD in early trade

September 07, 2023 (MLN): The Pakistani rupee (PKR) has strengthened by around 2 rupees in today's early trade against the US dollar in the interbank market, as compared to the previous closing of PKR 306.9795 per USD.

The local unit was quoted at PKR 304.95/305.69 [10:01 PST] with the trades being reported at 305 per USD while in the open market, PKR is being traded at 310/313 per USD.

The local currency has appreciated because of the recent reforms introduced by the State Bank of Pakistan (SBP) in the exchange companies sector. The reforms aim to consolidate and transform various types of exchange companies into a single category with a well-defined mandate and higher capital requirements.

The reforms also encourage leading banks to establish wholly owned exchange companies to cater to the legitimate foreign exchange needs of the general public.

Moreover, the ongoing crackdown against speculators, hoarders, and smugglers has also boosted the sentiment. Consequently, the gap between the open market and interbank has fallen significantly around the IMF’s suggested level of 1.25%.

To note, PKR in the open market has made a remarkable appreciation of 20 rupees in the Pakistani Rupee (PKR) against the US Dollar over just the past two trading sessions.

Besides the official Kerb market, the black market for Hawala/Hundi is also experiencing a significant decline in dollar rates.

Previously, the rising demand for dollars due to speculation and smuggling had continually widened the gap between open market and interbank rates, causing significant concern.

On September 04, 2023, the gap surged to Rs25.36 per USD or 8.3%, far exceeding the IMF's recommended threshold.

It is safe to say that the government's initiatives are effectively yielding results in curbing speculative activities in the open market without requiring any intervention on the interbank side.

The situation could further improve if the government takes similar initiatives against gold smuggling, as individuals who cannot purchase dollars may now opt to invest their money in smuggled gold.

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