PKR sees massive recovery of over Rs10 in interbank – Business

The rupee recovered strongly in the interbank market on Wednesday, gaining more than Rs10 against the dollar.

According to the Forex Association of Pakistan (FAP), the rupee gained 88 paise at 9:50 am to reach Rs237.5 compared to yesterday’s close of Rs238.38.

Later, the local currency further recovered and traded at Rs228 around 12:50pm, up Rs10.38 from yesterday’s close, according to Mettis Worldwide — a web-based portal for financial data and analysis.

FAP chairman Malik Bostan said the lower import bill for July had helped reduce the country’s trade deficit, which in turn eased pressure on the rupee.

Business and economics journalist Khurram Husain said the rupee’s recovery was due to a sharp drop in import payments after all letters of credit for oil were cleared in July and exporters rushed to close their open positions.

“August is likely to see lower oil-related payments with near-record stocks of gasoline and diesel in the country today. Rupee is returning to where it should be after a brief period of extraordinary pressure in July,” he tweeted.

According to Mettis WorldwideToday’s remarkable recovery is “primarily attributed to improved economic fundamentals, as the import bill has been cut to $4.86 billion in July 2022, down 38.31 percent, from $7.88 billion in the previous year.” month”.

Accordingly, the trade deficit for July narrowed to $2.64 billion, from a deficit of $4.96 billion in the previous month, down 46.77 percent.

Bostan said part of today’s recovery was also based on the expectation that the International Monetary Fund (IMF) would soon release its tranche.

“The difference of 10 rupees between open market and interbank market rates due to dollar smuggling into Afghanistan has been smoothed out due to tighter security at the border,” Bostan said. “The transfer of dollars to Afghanistan has stopped, so the effect has strengthened the rupee.”

“Confidence-boosting comments from the IMF team have improved sentiment, plus a drop in oil prices and higher inventory will have a beneficial effect on the current account and are being considered to bring PKR more in line with its REER value said Komal Mansoor, head of research at Tresmark, a web-based terminal for financial markets.

Alpha Beta Core CEO Khurram Schehzad said that once money was received from the IMF, it would unlock multilateral inflows, including from friendly countries.

The inflows, combined with the global and local recession affecting or lowering oil, food and commodity prices, would lead to a much lower import bill, decreasing demand for dollar outflows, he said. “This should help the PKR improve against the dollar, at least for some time.”

Mettis Worldwide Executive Director Saad bin Naseer said the PKR stabilized on the bleak demand outlook amid rising inflation, as seen in the slump in fuel and cement sales in July.

Referring to the IMF statement yesterday that Pakistan has completed all previous actions for the seventh and eighth revisions, he said the clarity on that front and the expected inflows also supported the local currency.

“However, a further strengthening of the US dollar or a flare-up in US-China tensions over Taiwan could pose downside risks to the rupee,” he added.

Import invoice dips

Data released Tuesday by the Pakistan Bureau of Statistics (PBS) shows that the import bill fell 12.81 percent in July to $4.86 billion, from $5.57 billion in the same month last year. . On a monthly basis, the import invoice fell by 38.31 pc.

In June alone, the import bill rose to $7.74 billion, from $6.28 billion in the same month last year, an increase of 23.26 pc. reflects.

The import account was up 43.45 pc during fiscal year 2021-22. increased to $80.51 billion from $56.12 billion a year ago.

Pakistan’s trade deficit fell 18.33 percent to $2.64 billion in July, from $3.23 billion in the same month last year. The month-on-month decline in the trade deficit was recorded at 46.76pc.

In FY22, the trade deficit hit an all-time high of $48.66 billion from $30.96 billion a year ago, indicating a 57 percent increase due to higher-than-expected imports.

Leave a Comment

Your email address will not be published.