Rupee recovers against dollar in interbank market

• The exchange rate gained 26 pasias to reach Rs223.69 against the dollar, dealers said.
• The local currency reversed its losses against the foreign currency.
• Foreign exchange reserves held by the State Bank of Pakistan fell $134 million to reach $7.82 billion during the week ended November 18.

KARACHI: The Pakistani rupee showed recovery against the dollar on Thursday on the back of recent inflows from the Asian Infrastructure Investment Bank (AIIB) on November 29 and the State Bank of Pakistan’s (SBP) measure to curb the demand for the greenback, dealers said.

The exchange rate gained 26 pasias to reach Rs223.69 against the dollar, against the previous day’s closing of Rs223.95 in the interbank foreign exchange market.

Experts said the local currency reversed its losses against the foreign currency, as the government received $500 million from the AIIB to shore up its foreign exchange reserves.

The 100 basis points hike in the key policy rate to reach 16 per cent resulted in discouraging the manufacturing sector to import raw material ultimately reducing demand for the dollar.

Pakistan’s negotiation with the International Monetary Fund (IMF) for the ninth review under the Extended Fund Facility (EFF) loan programme have been delayed which may increase pressure on the local unit.

The foreign exchange reserves held by the State Bank of Pakistan fell $134 million to reach $7.82 billion during the week ended November 18, compared with $7.95 billion on November 11.

According to the central bank, the decrease in reserves came due to external debt repayment.

The overall liquid foreign currency reserves held by the country, including the net reserves held by banks other than the SBP, stood at $13.64 billion, while the net reserves held by banks amounted to $5.81 billion.

The net foreign direct investment (FDI) in Pakistan slumped 62 per cent to $95 million in October 2022, compared with $247.3 million in the same month last year. However, the net FDI was up 13 per cent, compared with $84 million recorded in September 2022.

During the first four months of fiscal year 2023, the net FDI dropped 52 per cent year-on-year to $348 million, compared with $726 million during the same period of last fiscal year.

The workers remittances have also declined 15.7 per cent to reach $2.21 billion in October, compared with $2.62 billion in the same month of the last year.

On a monthly basis, the remittances witnessed a decline of 9 per cent, compared with $2.43 billion received during September.

The textile exports declined 15.2 per cent to reach $1.35 billion in October, compared with $1.6 billion in the corresponding month of the last year.

On a monthly basis, the exports declined 11.1 per cent with a major decline in components including cotton cloth, knitwear, bedwear, towels, and readymade garments.

The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs18.84 or 9.19 per cent from Rs204.85 to dollar on June 30, 2022 to the current level of Rs223.69.

At the open market, the buying and selling of the dollar was recorded at Rs229.25 and Rs231.25 at 4:30pm PST.

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