After a month of declines, the rupee finally started to rise against the dollar on Friday, closing at Rs185.9 in the interbank market. This was mostly due to the Supreme Court’s decision to reinstate the National Assembly and the central bank’s decision to raise the policy rate by 2.5%.
According to the Forex Association of Pakistan (FAP), the dollar declined by Rs2.28 from Thursday’s all-time high of Rs188.18. Yesterday, the dollar smashed the rupee once again, trading as high as Rs190 in the interbank market but eventually closing at Rs2.05.
The currency has now recovered and was trading at Rs 185.4 at one point today. The currency’s selling rate on the open market was Rs188.05, while the purchasing rate was Rs186.3.
Zafar Paracha, the general secretary of the Pakistan Exchange Companies Association, said that the rupee’s rebound was “smart” and that he was sure that the pressure on it would ease as the political turmoil eased.
It was yesterday when the Supreme Court overturned the deputy speaker’s decision not to pass a no-trust motion against Prime Minister Imran Khan and the president’s decision to dissolve parliament on the PM’s request. This ended five days of uncertainty about the government’s ability to run the country.
Malik Bostan, the head of the Pakistan Forex Association, said that the rupee’s recovery was due to the supreme court’s decision.
“We hope that once the political turmoil passes, the economy stabilises and the dollar returns to Rs 100,” he said.
After a no-confidence motion was put forward in the National Assembly on March 8, it lost Rs8.4 in value between March 8 and April 7, according to a web-based service called Metis Global.
Mettis credited the rupee’s significant rise today to the central bank’s “courageous action” yesterday in hiking the policy rate by 250 basis points.
The Monetary Policy Committee (MPC) of the SBP said that the action was taken to deal with rising prices and dwindling reserves.
It said in a statement that the rise in the policy rate will help keep the economy and prices stable by raising real interest rates in the future to “mildly positive territory.”
“Pakistan’s external financing requirements for FY22 are entirely satisfied via designated sources. Looking forward, the MPC underlined that today’s bold moves, along with a decrease in domestic political instability and cautious fiscal policies, could contribute to Pakistan’s rapid economic recovery after COVID-19 being durable, as stated in the announcement.
