September, 22, 2023
Dollar Strengthens as Pakistani Rupee Surges in Local Markets

Dollar Strengthens as Pakistani Rupee Surges in Local Markets

In Karachi, the Pakistani Rupee has seen a significant boost against the US dollar, surging by PKR 17 in just two days in both the open market and interbank. This remarkable rise can be attributed to a positive shift in sentiment following a meeting between the army chief and the business community, coupled with a crackdown on illegal currency dealers.

In the Open Market, the Rupee Strengthened by 11 Rupees, Closing at 312 Per Dollar, Narrowing the Gap to IMF’s Mandated Limit

In the open market, the rupee strengthened by 11 rupees, closing at 312 per dollar compared to the previous session’s rate of 323, thus narrowing the gap with the official rate to 1.5%, close to the International Monetary Fund’s mandated limit of 1.25%. Similarly, in the interbank market, the rupee experienced a gain of 0.04%, settling at 306.98 per dollar, as the State Bank of Pakistan (SBP) reported.

Pakistan is currently operating under an IMF program that mandates the maintenance of a flexible exchange rate regime and the preservation of a 1.25% gap between the inter-bank and open market rates. Currency dealers assert that the rupee’s recent strength is still influenced by the meeting between Chief of Army Staff General Asim Munir and the business community, where he offered support for addressing their concerns and discussed issues concerning dollar smuggling and money laundering.

Zafar Paracha, General Secretary of ECAP, emphasized the need for sustained measures against dollar smuggling rather than one-time actions. Market indicators suggest that the rupee may continue to strengthen in the open market, possibly falling below the 300 level, with the inter-bank rate following suit, according to a dealer at a central bank.

However, some analysts caution against relying solely on administrative measures to sustain the rupee’s appreciation in the long term. They argue that improvements in dollar inflows are necessary to address the widening current account deficit and declining foreign exchange reserves. Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited, emphasized the importance of dollar inflows in controlling the interbank exchange rate.

In a surprising development, gold prices in the local market experienced a significant decline on Wednesday, dropping by Rs10,500 per tola due to the strengthening of the Pakistani rupee. According to All Sindh Sarafa Jewellers Association data, gold rates fell to Rs222,300/tola, indicating a potential shift in the recent upward trend of the precious metal. Similarly, the price of 10 grams of gold also witnessed a sharp decline, falling by Rs9,002 to reach Rs190,586. This local price adjustment coincided with a $5 drop in international gold rates, which settled at $1,926/ounce.

Silver rates followed suit, experiencing a decline with prices dropping by Rs100 to close at Rs2,700/tola. The cost of 10 grams of silver saw a reduction of Rs85.73, reaching Rs2,314.81.

Muhammad Shafi Khan, a senior goldsmith with extensive industry experience, pointed out that the international gold market had shown signs of a downturn, with prices recently touching $1,944/ounce. Concurrently, the Pakistani rupee exhibited remarkable strength against the US dollar, a crucial factor contributing to the sudden decrease in gold rates.

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