Pakistani currency on Friday hit a four-and-a-half-month high at Rs279.04 against the US dollar in the inter-bank market where it extended its uptrend for the second consecutive day.

The latest, meaningful increase in the rupee value came in the wake of International Monetary Fund’s (IMF) positive response to Pakistan over the request of initiating formal talks for a new loan programme ahead of the completion of the process of forming a new government.

According to State Bank of Pakistan’s (SBP) data, the domestic currency increased 0.08%, or Rs0.25, against the greenback on a day-on-day basis, wiping out the nominal losses suffered in the prior one week.

With the appreciation, the currency has cumulatively surged 10.05%, or Rs28.06, over the past six months since plunging to the all-time low close at Rs307.10/$ in the first week of September 2023.

In the open market too, the rupee extended gains for the second successive day by Rs0.04, closing at Rs281.70/$, according to the Exchange Companies Association of Pakistan (ECAP).

The smart recovery of the rupee has narrowed disparity between the two currency markets in the past two days to Rs2.67 (0.95%) compared to the difference of over 1% last week. The gap stood low compared to the ceiling of 1.25% (around Rs4 at current levels) recommended by the IMF.

The maintenance of the difference within the IMF-recommended limit signals that currency markets are being run by market forces (dealers and traders) instead of the government, meeting a key condition of the IMF loan programme.

Published in The Express Tribune, March 9th, 2024.

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