KARACHI: The rupee rallied on Friday to rise on suspected central bank intervention after falling to 188 to the dollar at the start of trading, dealers said.
The rupiah ended at 186.70 to the dollar and 0.14% higher than Thursday’s close at 187.50, after falling to a session low of 188. It gained 50 paisa to close at 187 .50 to the dollar on the open market.
“The central bank probably sold $7-10 million to stem the fall of the rupee,” one dealer said. “This time, the intervention of the SBP (State Bank of Pakistan) seemed quite decisive.”
Zafar Paracha, secretary general of the Association of Exchange Companies of Pakistan, said “finally, the central bank has stepped in to support the currency and calm investors’ nerves.”
Parsha expects the rupiah to trade at the 186 level in the next session and is expected to strengthen further next week.
“Overseas Pakistanis generally send more money home during Ramazan and before Eid. These inflows have also helped improve the supply of dollars in the market,” he added.
Dealers said the local unit remained under pressure over the past four sessions amid rising imports and uncertainty over the International Monetary Fund’s bailout package. However, the rupee pared its losses after some support from Eid-related remittances. The rupee has depreciated by 2.42% over the past four sessions.
“The market was very volatile in the early morning, and the rupiah touched a low of 188 per dollar, but recovered at the close with the help of the SBP,” said another trader. “Although the Rupee failed to show a significant recovery, Eid-related remittances nevertheless helped the Rupee gain a slight value against the dollar.”
Remittances to Pakistan from its citizens employed abroad hit their highest level for a single month in March, rising 28.3 percent month-on-month. Dealers said the outcome of International Monetary Fund (IMF) talks with Pakistan to revive the $6 billion loan program would give a clue to the future direction of the rupee.
Finance Minister Miftah Ismail has pledged to pursue policies that will respond to IMF requests to release bailout funds.
Ismail is in Washington to meet with IMF officials on their seventh review of the bailout package agreed in July 2019.
If the review is approved, the IMF will release more than $900 million and release other external financing crucial to the depletion of the country’s foreign currency reserves.
The country’s foreign exchange reserves were $17 billion in the week ending April 16. SBP reserves were $10.9 billion. These reserves are sufficient for less than two months of import payments.