PKR maintains momentum, gains over 9 paisa against USD

January 30, 2024 (MLN): The Pakistani rupee (PKR) appreciated by 9.32 paisa against the US dollar in Tuesday's interbank session as the currency settled the trade at PKR 279.55, as compared to the previous day's closing of PKR 279.64 per USD.

The local unit saw an intraday high (bid) of 279.66 and a low (ask) of 279.6.

In the open market, exchange companies quoted the dollar at 278.71 for buying and 280.86 for selling.

In a key development, the central bank has decided to keep the policy rate unchanged at 22% for the fifth consecutive meeting.

The home unit is on an upward spree as last week marked the eleventh consecutive weekly victory for PKR against the greenback.

The country received the second installment of SDR 528 million, equivalent to $705.6m from the International Monetary Fund (IMF) which helped boost FX reserves.

The first review report under the Standby Arrangement published by the fund addresses the importance of allowing the exchange rate to be determined by the market, emphasizing the need for a gradual deepening of the foreign exchange (FX) market.

The Staff emphasized that deepening FX market liquidity should result in a rebound in trading volumes to levels seen some months ago and could only occur if banks are encouraged to manage FX flows via the interbank market, offering exchange rates to ensure FX flows into the system when needed.

To ensure that the exchange rate can act as a shock absorber, the IMF highlighted that the government must refrain from formal or informal restrictions.

The IMF Staff and the authorities agreed that SBP's interventions in the FX market should remain guided by the objective of building FX buffers, with sales not to be used to prevent trend depreciation of the rupee driven by fundamentals.

Meanwhile, the government agreed to redouble efforts to eliminate the existing exchange restrictions and multiple currency practices in early 2024.

The SBP's planned reforms of the EC sector could improve oversight, governance, and transparency, but further efforts to monitor the pricing in the informal exchange rate markets would helpfully identify periods of market dysfunction.

The government reaffirmed its commitment to the FX market by finalizing preparations for transitioning to a new trading platform for spot transactions connecting all banks. This system is scheduled to go live by end-January 2024.

Moreover, the government pledged to undertake a feasibility study to conduct FX purchases and sales via auctions, including the publication of auction results, by the end of March 2024.

In pursuit of its mandate to implement an exchange rate policy, SBP is developing a framework to monitor pricing and broader developments in informal markets and publish a report with findings by end-March 2024.

As limited reserve buffers continue to be the main constraint for durably entrenching external stability, SBP’s interventions in the FX market will remain guided by the objective of building FX buffers, with FX sales limited to episodes of disorderly market conditions and not used to prevent a trend depreciation of the rupee driven by fundamentals.

In comparison to major currencies, PKR gained 29.66 paisa against the Euro, closing at 302.68 compared to the previous value of 302.98.

The British Pound became cheaper by 53.78 paisa, closing at 354.86 compared to 355.4 from a day ago.

Swiss franc saw gains of 45.64 paisa, closing at 324.6 compared to 324.15 from the previous session.

Against the Japanese Yen, PKR lost 0.6 paisa, closing at 1.898 versus 1.892 a day ago.

The Chinese Yuan gained 0.5 paisa, closing at 38.9514 against 38.9464 from the previous session.

The Saudi Riyal closed at 74.54 with a loss of 2.58 paisa from its value of 74.57 a day ago.

The U.A.E Dirham decreased in value by 2.54 paisa from 76.136 a day ago to 76.111.

During the current financial year, PKR has appreciated against the Dollar by 6.44 rupees or 2.3%. While the current calendar year has seen PKR appreciated by 2.31 rupees or 0.83%.

In the Money Market, the benchmark 6-month Karachi Interbank Bid and Offer rates inched up by 13 bps to 20.58% and 20.83%.

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