KARACHI: On Friday, the Pakistani rupee made a strong comeback, rising to 199 against the US dollar on the interbank market during the day.
This was because the mood on the market had improved after an unexpected rise in oil prices overnight, which gave people hope that the International Monetary Fund’s (IMF) program could be brought back to life.
In the early hours of Friday, the local currency was also worth 198 dollars in exchange for a dollar.
The government raised the price of gasoline and diesel by Rs 30 per liter to meet the IMF’s final condition for getting the next $900 million installments of the $6 billion bailout. The rise in prices showed that the economy was about to get better and lowered the risk of a default-like situation. This made people trust the foreign exchange market again.
On the other hand, Finance Minister Miftah Ismail admitted that the measure would cause some inflation, but said that the government had no choice because it had already paid an Rs56 per liter diesel subsidy.
Tahir Abbas, the head of research at Arif Habib Limited, said that the rise in the local currency was caused by a rise in the price of petroleum goods.
“The rise in prices for petroleum products is a clear sign that Pakistan has decided to do everything it can to get back on track with its IMF program, so the market’s mood has improved, “he said. “It looks like the country is ready to take tough steps to help the economy, so economic indicators are getting better.”
He said the uncertainty has gone away, and the market now knows what’s going on.
On Thursday, the local currency ended the day at 202.01, down 9 paisas, or 0.04 percent. This was a small drop from the previous sessions. Since April 30, 2022, the Pakistani rupee has been going down because investors are losing faith in the economy and there is a lot of political uncertainty.
The foreign exchange reserves of the State Bank of Pakistan (SBP) fell by $75 million between May 13 and May 20, bringing the total to $10.09 billion, which is still less than 1.5 months of imports.
On the international scene, the US dollar fell to its lowest level in a month against its main rivals on Friday. This happened because traders lowered their expectations for Fed rate hikes because of signs that the central bank may delay or even stop its tightening cycle in the second half of the year.
The dollar index, which compares the dollar to a basket of six major currencies, fell to 101.43 for the first time since April 25. Asian stocks going up even more cut even further into the demand for the dollar as a safe haven.