The rupee continued its gains on Wednesday, improving by another one rupee or 0.36 per cent against the greenback in the interbank market, according to the daily data released by the State Bank of Pakistan.

The dollar was being traded at Rs279.51 in the interbank at the time of the closing.

It closed at Rs280.51 yesterday.

The greenback also dipped by Rs1 in the open market at 12pm, falling below Rs280 for the first time since July.

The development comes amid a strict crackdown on the currency market to stem outflows of foreign currency.

‘Strict compliance with local laws’

Topline Securities chief executive Mohammed Sohail stated that the “record monthly gain” happened only due to “strict compliance with local laws which were not being followed by smugglers, currency investors, etc”.

“Will this sustain? Depends on Pakistan’s IMF’s [International Monetary Fund] loan review due in November and how Pakistan is able to increase their low foreign exchange reserves,” he said.

According to Tresmark’s Head of Strategy Komal Mansoor, the price of Rs285 to a dollar was a “sound fundamental level as the real enemy of businesses is volatility”.

She stated that below this rate, exporters would have a tough time keeping their margins intact as the price for Pakistani goods increases as the currency strengthens.

She also stated that importers would have to suffer “substantial inventory losses” given that they would have purchased goods at a higher exchange rate.

Komal added that Pakistan would need the IMF to look away from the REER-based [real effective exchange rate] valuation as the estimated value is at 102 with yesterday’s closing.

The indicator, with its index value of 100, measures the value of a currency in relation to its major trading partners.

REER valued above 100 implies that the currency is overvalued and needs to depreciate to come back to the standard 100 and the continuing downward trend of the rupee against the dollar could make IMF uncomfortable.

Remittances down 20pc in 1st quarter

Meanwhile, the crackdown against illegal currency business has failed to substantially improve the inflow of remittances in September as was anticipated by the economic managers of the country and the State Bank of Pakistan (SBP), according to a Dawn report.

The central bank on Tuesday reported that remittances rose just a little over 5 per cent month-on-month in September against the expectations of a 25pc hike.

However, the remittances fell by 20pc in the first quarter compared to the same period last year.

The financial sector was enthusiastic about the positive outcome of the crackdown against illegal currency business and smuggling while the bankers were reporting higher inflows from overseas Pakistanis.

More to follow