Pakistani rupee continued its upward trajectory on Wednesday as the US dollar plunged by another Rs0.74 to Rs169.8 in the intra-day trading at the inter-bank market.
The domestic unit has gained Rs5.47 after it touched its peak at Rs175.27 against the USD on October 26, 2021.
Head of Research at Ismail Iqbal Securities Fahad Rauf credited the appreciation of the local currency primarily to the $3 billion assistance promised by Saudi Arabia to Pakistan.
He said, “Saudi aid played a significant role in reversing rupee’s slide as it reversed the selling momentum in the foreign exchange market”.
The real effective exchange rate (REER) that is the country’s cost of trade with the world, dropped to 93-94 at the time when the rupee surpassed Rs175 against the greenback. Rauf said that the rupee was highly overvalued during that time hence, a correction was going to happen sooner or later.
He noted that mild improvement in exports did not result in a significant impact on the recovery of rupee adding, “However, exporters who were holding dollars while expecting the rupee to weaken further, are now selling them which is, in turn, stabilizing the value of local currency”.
In line with his views, the Head of Research at Intermarket Securities Saad Ali said that bilateral assistance from Saudi Arabia to Pakistan worth $3 billion was contributing to the recovery of the rupee.
He added that currently, sentiment is driving the market. “Moreover, market participants are optimistic regarding resumption of International Monetary Fund (IMF) bailout program after Finance Adviser Shaukat Tarin and State Bank of Pakistan Governor Reza Baqir reiterated that a good news will be announced soon”.
Ali noted that an agreement with IMF, will lead to the approval of a tranche worth $1 for Pakistan.
