The Pakistani rupee returns: Will the currency recover to 200 to a US dollar?

The Pakistani rupee is expected to continue its recovery against the US dollar as the government is confident of receiving higher inflows, shrinking current account deficit and decreasing imports of petroleum products in the wake of lower oil prices in the international market.

The rupee, which appreciated almost six per cent in five consecutive days during the last week, will recover more value against the greenback and other major currencies due to corrective measures taken by the central bank and government to contain smuggling of the dollars and speculations in the market, experts said.

Earlier, the local currency shed more than 13 per cent of its value in the prior 10 consecutive working days, with an all-time low closing at 239.94 on July 28. It gained 0.94 per cent in the interbank market and closed at 224.04 on Friday.

On Wednesday, the rupee saw its best day ever when it appreciated by 4.19 per cent — the highest single-day gain since 1999.

Analysts and forex market experts said the currency will bounce back in coming weeks once the inflows will start increase in second half of the month. However, they cautioned that the political instability will continue to weigh on the rupee's future and may slow the recovery pace in coming days.

The State Bank of Pakistan (SBP) also expects that the IMF board will approve a staff-level agreement in the third week of August and disburse $1.2 billion tranche by month-end.

Recovery to continue

Zafar Paracha, General Secretary, Exchange Companies Association of Pakistan, said the rupee should continue its recovery drive against the US dollar and other major currencies as the import bill is on the decline and oil prices are coming down.

"The rupee artificially forced to shed its value in the interbank and open markets in past few weeks. It's value should not exceed beyond 200 to a dollar and the currency should trade in the range of 190 to 200 while in the longer run it should be stable at 160," Paracha told Khaleej Times.

Pakistan's trade deficit plunged 18.3 per cent to $2.64 billion in July from $3.23 billion in the corresponding period last year, according to the latest data from the Pakistan Bureau of Statistics.

Positive market sentiments

Samiullah Tariq, head of research at Pakistan Kuwait Investment Company, said the rupee should further strengthen its value this week as the market sentiments are positive in the wake of IMF deal, lower oil prices and shrinking trade deficit.

"In my view, the rupee should stable around 215 against the US dollar in the short-term period. So, the currency still has a room to recover more value as the imports are decreasing and inflows are expected to be on higher side after the disbursement of IMF loan tranche," Tariq told Khaleej Times.

Pakistan imports fell by more than a third in July to $5 billion from June's record monthly high of $7.7 billion as the government banned import of non-essential products.

— muzaffarrizvi@khaleejtimes.com