Rupee recovers 4.5% against dollar

KARACHI, March 03 (SABAH): The Pakistani currency made a sharp recovery of 4.5%, or over Rs12, to Rs273 against the US dollar in the interbank market at around noon on Friday.

The rupee partially gained ground against the greenback after yesterday’s historic drop of 6.7%, or Rs19, to an all-time low of Rs285 per US dollar.

The latest recovery follows three developments over the past 24 hours. Firstly, Finance Minister Ishaq Dar announced that the government expects to achieve the much-delayed staff-level agreement with the International Monetary Fund (IMF) next week. The programme is a lifeline for economic survival and averting imminent default.

Secondly, the rupee gained value after the central bank jacked up its key policy rate by 300 basis points to a 26-year high of 20% on Thursday last. The hike in the policy rate indirectly supports the rupee against the greenback, as it makes banking credit expensive, raises the cost of doing business and discourages imports.

Thirdly, the State Bank of Pakistan (SBP) officially announced that foreign exchange reserves have continued to grow for the third consecutive week on Thursday last.

The growth in foreign exchange reserves directly defends the local currency against the foreign dollar. The country’s reserves improved to an almost six-week high of $3.8 billion after China’s $700 million loan, the SBP reported on Thursday last.

Earlier, the domestic currency had plunged to a record low at Rs285 per dollar due to IMF concerns that the government was still controlling the rupee and the black currency market was reorganizing again.