Pakistani Rupee Shows Incremental Gains Against US Dollar, Government Commits to Structural Reforms

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In the latest intra-day update, the Pakistani rupee demonstrated marginal improvement against the US dollar, appreciating by 0.05% during the opening hours of trading in the inter-bank market on Monday. At 10:20 am, the rupee was recorded at 279.77, reflecting an increase of Re0.13.

A significant development unfolded as the caretaker government committed to the International Monetary Fund (IMF) that it would bolster reserves under conducive conditions and allow the rupee to find its market value amid normalized imports, even if pressures re-emerge.

As outlined in a Letter of Intent (LoI) submitted to the Managing Director of the IMF, the caretaker finance minister and the governor of the State Bank of Pakistan highlighted ongoing structural reforms in the exchange companies’ sector, aiming to enhance governance and transparency.

Looking ahead, the government plans to leverage strong program performance to gradually pave the way for macroeconomic sustainability and establish conditions for sustained and balanced growth.

During the preceding week, the rupee appreciated by Re0.46 or 0.16%, settling at 279.9 against the US dollar in the inter-bank market. This marks the tenth consecutive week of the local currency gaining ground against the greenback, propelled by the announcement of a staff-level agreement (SLA) between Pakistan and the IMF on the first review of the $3 billion Stand-by Arrangement (SBA), leading to the approval of the second tranche of the package.

On a global scale, the US dollar faced challenges in maintaining gains in early Asian trade on Monday. The dollar’s trade-weighted index showed a 0.07% decline at 103.19 and remained flat against the euro at $1.0898. The dollar’s rally this year has been tentative, with investors awaiting clarity on when the Federal Reserve might initiate rate cuts.

Recent data indicating resilient US economic activity, despite interest rates reaching decades-high levels, caused markets to revise expectations of rate cuts, pushing the timeline potentially beyond March.

In the realm of oil prices, a crucial indicator of currency parity, a second consecutive day of decline was observed on Monday. Economic headwinds impacting the global oil demand outlook took precedence over geopolitical concerns in the Middle East and an attack on a Russian fuel export terminal over the weekend. Brent crude fell 41 cents, or 0.5%, to $78.15 a barrel, following a 54-cent decrease.

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