The Pakistani rupee’s recovery streak continued on Friday with a gain of Rs2.02 against the dollar in the interbank market.
The local currency closed at Rs219.92 per dollar, according to the State Bank of Pakistan (SBP). This equates to an appreciation of 0.92 per cent from yesterday’s close of Rs221.94.
The rupee has recovered by Rs19.79 or 8.26pc in the last 11 sessions after falling close to an all-time low of Rs239.94 on Sept 22.
Exchange Companies Association of Pakistan (Ecap) General Secretary Zafar Paracha said the rupee’s value was improving because of regulators’ strict monitoring and action against speculators.
Exporters, who had kept their proceeds abroad, were now bringing back foreign exchange in fear of a further decline in the greenback’s value, which was improving supply, he added.
Paracha said that the market expected the SBP’s Monetary Policy Committee to either maintain or reduce the interest rate in its meeting on Monday, which would further strengthen the rupee.
Meanwhile, Tresmark’s Head of Research Komal Mansoor said the exchange rate was moving only on political news and economic fundamentals were not involved.
“Even though our default risk is increasing, the rupee is still strengthening. This is against the economic rules,” she commented.
She was referring to Moody’s Investors Service downgrading Pakistan’s local and foreign currency and senior unsecured debt ratings to Caa1 from B3, citing increased government liquidity and external vulnerability risks and higher debt sustainability risks following the devastating floods.
“The outlook remains negative,” said the New York-based rating agency, adding that the floods had exacerbated Pakistan’s liquidity and external credit weaknesses and vastly increased social spending needs, while government revenue is severely hit.
The downgrade has pushed the country into the C-category after seven years, i.e. March 2015.
Commenting on the development, Mansoor termed it “the last nail in the coffin”, adding that Pakistan remained heavily reliant on multilateral flows and loans from creditors for financing and the downgrade could mean prospects pulling out.
