Pakistani Currency Got Stable Against Dollar
Pakistani Currency Got Stable Against Dollar: The rupee remained stable against the dollar at Rs.121.4/121.6 in the inter-bank market on Thursday compared with Wednesday’s close of Rs.121.4/121.6.
Contrary to the impression created after the previous round of devaluation, the Pakistani currency weakened further by 3.65% in its third round last month. Since December, the rupee has cumulatively shed close to 13% of its value after the central bank reportedly abstained from intervening in response to the pressure due to a widening current account deficit.
The State Bank of Pakistan has maintained that the slide in the rupee’s value is due to supply and demand dynamics of foreign exchange in the inter-bank market. While it has promised prompt intervention in case of speculative or momentary pressures, the central bank will sit on the fence and let “market-driven adjustment in the exchange rate to continue to contain the imbalance in the external account and sustain a higher growth trajectory”, according to a press statement.
Foreign Reserves On Rise
Foreign exchange reserves held by the State Bank of Pakistan (SBP) increased 1.31% on a weekly basis, according to data released by the central bank on Thursday.
On June 29, foreign currency reserves held by the central bank were recorded at $9,788.8 million, up $126.3 million compared with $9,662.5 million in the previous week.
The increase has been attributed to due to official inflows.
Overall, liquid foreign reserves held by the country, including net reserves held by banks other than the SBP, stood at $16,385.7 million. Net reserves held by banks amounted to $6,596.9 million.
In April, the SBP’s reserves increased $593 million due to official inflows. Pakistan also raised $2.5 billion in November 2017 by floating dollar-denominated bonds in the international market in a bid to shore up official reserves.
A few months ago, the foreign currency reserves surged due to official inflows including $622 million from the Asian Development Bank (ADB) and $106 million from the World Bank. The SBP also received $350 million under the Coalition Support Fund (CSF).
In January, the SBP made a $500-million loan repayment to the State Administration of Foreign Exchange (SAFE), China.
The low level of reserves has already put severe pressure on the Pakistani rupee that has witnessed three rounds of devaluation, cumulatively shedding around 13% to the US dollar in the last six months.
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