By Our Staff Reporter
Karachi: The three-month rally that helped Pakistan’s rupee recover from record low is coming to an end, according to analysts and money managers.
Asia’s second-best currency closed at 158.49 per dollar on Wednesday, earning around 6 per cent after hitting a low of 168.44 on August 26, according to Central bank reports. The Rupee completed a 20-day winning rally, the longest streak since the State Bank of Pakistan began to make the data available.
For the first time in five years, stable foreign-exchange reserves and a return to current-account surplus have helped to shore up the currency thanks to record remittances. Separately, the nation won $1.4 billion in emergency loans from the International Monetary Fund this year, while also securing aid from the World Bank and the Asian Development Bank to resolve the economic effects of the Covid-19 outbreak.
“The recent appreciation in the rupee is mainly driven by FX inflows, positive market sentiments, and it is broadly in line with global USD weakness across major currencies,” said Pervez Shahbaz Khan, Global Treasurer at Askari Bank Ltd., in Karachi. “Future direction will depend on upcoming current account numbers.”
Pakistan’s foreign reserves, which have remained stable at around $12 billion this year despite the pandemic, may face pressure from reports that Islamabad will have to repay $2 billion to Saudi Arabia. The nation already repaid $1 billion of a $3 billion loan from the kingdom in August, after Riyadh failed to criticise India’s move to end nearly seven decades of autonomy in Jammu and Kashmir, which is also claimed by Pakistan.
While Samiullah Tariq, head of research at Karachi-based Pak-Kuwait Investment Co., expects the roupee to grow to about 158 against the dollar, Ahfaz Mustafa at Ismail Iqbal Securities Pvt. predicts the currency’s return on earnings.
“The rupee trend will reverse in the coming weeks as the U.S. election ends and dollar basket appreciates,” said Mustafa, chief executive officer at Ismail Iqbal. “The focus will shift more to local issues.”
Pakistan ‘s currency, which has been a managed float for most of its history, has seen long periods of stability followed by devaluation. As part of a $6 billion loan approved last year to avoid default, the country agreed with the IMF to adjust its currency to a market-based exchange rate that allowed it to move in both directions.