Rupee gains ground against US dollar after government assurances

KARACHI: The rupee registered nominal gains against the US dollar on Monday in the interbank market after the finance ministry and State Bank of Pakistan (SBP) laid down the map for navigating the country's economy during the ongoing fiscal year.

The local unit made gained Rs0.53 or 0.22% and reached 238.84, up from 239.37 in the last trading session. Meanwhile, it closed at 246 in the open market.

The local unit — which is currently ranked among the worst performing currencies globally — took a battering in July in the interbank and open markets. In the last four months, the rupee has depreciated by about Rs60.

Finance ministry and the central bank, in a joint statement, assured that the country’s problems were temporary and being forcefully addressed.

The statement assured that all prior actions for the International Monetary Fund's (IMF) review were completed and the Executive Board's meeting for the release of the $1.2 billion loan is expected in a couple of weeks.

It also mentioned that macroeconomic policies — both fiscal policy and monetary policy — have been appropriately tightened to reduce demand-led pressures and rein in the current account deficit, which is a major challenge for the government.

The SBP and finance ministry said that the rupee has been overshot temporarily, but it is expected to appreciate in line with fundamentals over the next few months.

Around half of the rupee depreciation, since December 2021 can be attributed to the global surge in the US dollar, following historic tightening by the Federal Reserve and heightened risk aversion, they said, noting that the market sentiment has also played a major role in this regard.

"This uncertainty is being resolved, such that the sentiment-driven part of the Rupee depreciation will also unwind over the coming period," the statement said.

Improvement in 'next two weeks'

In a press conference on Sunday, Finance minister Miftah Ismail said that the Pakistani rupee — which has taken a beating against the US dollar in recent weeks — should see some improvement "in the two weeks".

"I really think — although I never like to speculate on the currency market — that the rupee's true value is far greater [than what it is right now]," the finance minister said.

Ismail said that efforts would be geared towards more dollars coming in daily and fewer leaving the country next month. "With our efforts to reduce imports and InshaAllah, with the daily rise in incoming dollars versus a decline in outgoing units, there will be a surplus [of dollars]," he said.

"This will lead to a reduced pressure [on the rupee] and the dollar's value against the rupee should then see a slight drop," the minister added.

Ismail said that he has hope that the "next two weeks will InshaAllah be better".