After a bleak month, the rupee finally made a comeback against the dollar on Friday, closing at Rs185.9 in the interbank market, a development that is largely attributed to the Supreme Court’s decision to restore the National Assembly as well as the central bank’s decision to increase the policy rate by 2.5 per cent.
According to the Forex Association of Pakistan (FAP), the greenback depreciated by Rs2.28 over Thursday’s close of Rs188.18 when it had reached an all-time high. Yesterday, the dollar had crushed the local currency once again as it was traded as high as Rs190 in the interbank market but finally closed with an appreciation of Rs2.05.
However, the rupee rebounded today and was trading at Rs185.4 at one point. In the open market, the currency’s selling price was recorded at Rs188.05 and buying rate at Rs186.3.
General secretary of the Exchange Companies Association of Pakistan, Zafar Paracha, termed rupee’s recovery “smart” and hoped that the pressure on it would decrease as the political crisis subsides.
Yesterday, the Supreme Court set aside the deputy speaker’s ruling to dismiss the no-trust resolution against Prime Minister Imran Khan and the subsequent dissolution of the NA by the president on the PM’s advice, putting an end to five days of uncertainty on the status of the government.
Meanwhile, Pakistan Forex Association Chairman Malik Bostan credited the apex court’s decision for rupee’s comeback.
“We are hopeful that as the political crisis come to an end, the economy will stabilise and dollar will come back to Rs100,” he added.
According to Metis Global — a web-based financial data and analytics portal — the rupee had lost its worth by Rs8.4 between March 8, when the no-confidence movement was submitted in the NA, and April 7.
Mettis attributed today’s notable appreciation of the rupee to the central bank’s “bold move” to raise the policy rate by 250 basis points to 12.25 per cent yesterday.
The SBP’s Monetary Policy Committee (MPC) said the move aimed to tackle rising inflation as well as falling reserves.
In a statement, it said the increase in the policy rate would serve to “help to safeguard external and price stability” as forward-looking real interest rates would be increased to “mildly positive territory”.
“Pakistan’s external financing needs in FY22 are fully met from identified sources. Looking ahead, the MPC noted that today’s decisive actions, together with a reduction in domestic political uncertainty and prudent fiscal policies, should help ensure that Pakistan’s robust economic recovery from Covid-19 remains sustainable,” the statement said.
