Rupee remains stable vs US dollar

KARACHI: On Monday, the interbank market witnessed a Re0.01 depreciation in the value of the Pakistani rupee vs. the US dollar.

According to the State Bank of Pakistan, the rupee finished at 223.95 against the U.S. dollar on the interbank market, up from 223.94 on Friday (SBP).

The rupee has lost value in recent sessions. Still, it has remained within the 223 level due to restrictions placed on import payments, the opening of letters of credit, and travelers’ foreign-currency carrying limits.

Analysts believe it was also caused by the country’s diminishing dollar reserves, which exacerbated negative sentiment. However, the local currency is projected to recover later in the week due to anticipated inflows from the Asian Infrastructure Investment Bank (AIIB).

In a note sent to its Twitter account, the Pakistan Business Council (PBC) indicated that it is impossible to expect the Pakistani rupee to resist gravity (given its diminishing foreign exchange position).

“Strengthening the rupee through administrative limitations makes exports less competitive and imports (even if they are restricted) more affordable. Why does this make sense when we desire the opposite — increased exports?” it said.

The State Bank of Pakistan (SBP) is anticipating external flows from multilateral (World Bank, Asian Development Bank, AIIB, and others), bilateral, and other sources, according to a client note from Tresmark from the previous week.

Nonetheless, contrary to the prevailing opinion, the platform for treasury markets reported that despite certain positives, the rupee’s depreciation does not appear to be ending anytime soon.

It was noted that the rupee/dollar parity could approach previous highs if pressure on the country’s foreign exchange reserves is not relieved.