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What’s going on with the Pakistani Rupee vs. Dollar (USD/PKR)? 

What’s going on with the Pakistani Rupee vs. Dollar (USD/PKR)? 
Elmaz Sabovic

On Tuesday, December 12, the Pakistani rupee (PKR) held steady against the US dollar in the open market but recorded gains in the interbank market.

Throughout the day, currency dealers reported that the rupee was quoted at 284.75 for selling and 281.75 for buying purposes for customers.

At the conclusion of the trading day, the currency maintained its closing levels, as indicated by data from the Exchange Companies Association of Pakistan (ECAP).

On Tuesday afternoon, the interbank market’s rupee was around 283 against the US dollar.  Globally, investors are anticipating the impact of US inflation data from November and the outcomes of central bank meetings on currency markets.

PKR YTD performance against the USD chart. Source: TradingView
PKR YTD performance against the USD chart. Source: TradingView

Despite a decrease in foreign exchange reserves, experts assert that the market maintains confidence due to the anticipated disbursement of funds by the International Monetary Fund (IMF) next month.

According to a report, the IMF executive board is scheduled to convene on January 11 to deliberate the final approval for the disbursement of the next $700 million tranche from its ongoing loan program with Pakistan.

USD/PKR technical analysis

The upward trajectory of the Pakistani rupee against the US dollar was interrupted on Monday, with the currency experiencing a marginal dip of 0.01% in the interbank market.

In the preceding week, the rupee had continued its upward trend, appreciating by 0.38% or Rs1.10 to reach a settlement of 283.87 against the US dollar in the interbank market.

This marked the fourth consecutive week of rupee appreciation against the dollar, propelled by the announcement of a staff-level agreement (SLA) between Pakistan and IMF regarding the first review of the $3 billion Stand-by Arrangement (SBA).

USD/PKR weekly chart.  Source: TradingView
USD/PKR weekly chart. Source: TradingView

In a significant development, the Pakistan Bureau of Statistics (PBS) has projected the Gross Domestic Product (GDP) at 2.17% for the initial quarter of the present fiscal year. Nevertheless, an adverse financial account in October 2023 suggests that the country needs to receive fresh inflows from abroad.

Pakistan faces challenges such as substantial debt payments and an external funding shortfall, putting pressure on the rupee. The nation teetered on the edge of default this year, and declining foreign investments and Asia’s highest inflation compounded its challenges. Additionally, subdued remittances are increasing its reliance on foreign aid for dollar inflows.

The currency has depreciated approximately 20% against the dollar this year, and analysts predict ongoing challenges. Concerns persist that the difficulties may extend into 2024, necessitating additional aid for the government’s fragile economy.

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