KARACHI: The rupee ended slightly higher against the dollar on Tuesday amid positive sentiment after Pakistan’s annual consumer price inflation slowed to a 44-month low in September.
The rupee closed at 277.68 to the dollar in the interbank market, compared with Monday’s closing rate of 277.71.The rupee gained ground in the open market. It was trading at 279.84 per dollar, up from 279.94 in the previous session.
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.
“Today, the rupee inched up as remittances and dollar inflows from exporters met importer demand. But we will have to wait and watch how the market behaves over the next few days,” said a currency dealer.
Tresmark, a financial terminal while analysing the impact of declining inflation on the rupee in a note, said that the real effective exchange rate (REER) will deflate with lower inflation.“This sends a signal to the market that the local currency will appreciate,” it said.
“However, there is an invisible floor to USDPKR and analysts do not project any rupee appreciation. Lower interest rates will also vet consumer demand and import bill may start going up from next quarter, neutralising any short-term Rupee gains,” it added.
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