KARACHI: The rupee extended gains for a second consecutive session in the interbank market on Wednesday.The rupee ended at 277.63 per dollar, slightly up from 277.68 in the previous session.
In the open market, however, the rupee did lose slight ground against the dollar. The rupee was trading at 279.88, compared with 279.84 on Tuesday.As remittances and dollar inflows from exporters met importer demand, dealers stated that the currency appreciated. In addition, the upbeat economic data lifted market sentiment.
The consumer price index inflation decreased to 6.9 per cent in September, the lowest since January 2021, mainly due to a high base effect.The latest inflation number is slightly better than expected, allowing the central bank to cut interest rates further for a fourth consecutive month at its policy review on November 4.
According to analysts, when inflation declines, the real effective exchange rate (REER) will deflate. This indicates to the market that there will be an increase in value of the local currency.The rupee-dollar parity does, however, have an invisible floor, and analysts do not anticipate any rupee appreciation. In addition to curbing consumer demand, lower interest rates may cause import costs to rise starting in the quarter to come, offsetting any short-term rupee gains.