As per the State Bank of Pakistan (SBP), the PKR finished at 175.04 against the USD after a day-on-day depreciation of 74 paisas or 0.42%. On Tuesday, the rupee had closed at 174.30 against the dollar in the inter-bank market.

The drop comes after the rupee had registered back-to-back gains on Monday and Tuesday, appreciating over 0.5%. The gains came after the currency market got a sense of direction as Pakistan finally reached a staff-level agreement with the International Monetary Fund (IMF).

However, the gains did not last a third session.

Back-to-back gains for Pakistan's rupee against US dollar

“The upward movement of PKR against the USD is due to supply-demand movement in the market, as the exchange rate is market-determined,” Samiullah Tariq, head of research and development at Pakistan Kuwait Investment Company (Private) Limited, told Business Recorder.

Tariq said the IMF announcement did create a positive sentiment in the market, but the economy continues to battle the current account deficit (CAD), suggesting high demand for the dollar.

Pakistan’s current account deficit widened to $1.66 billion in October 2021 from a surplus of $448 million recorded in the same month last year. On a monthly basis, CAD widened 46% as compared to $1.13 billion recorded in the previous month (September 2021).

Tariq added that the CAD for the upcoming month is expected to be lower, amid import-curtailing measures taken by the authorities, which would ease pressure on the rupee.

“Furthermore, export figures are expected to improve on the back of an increase in cotton price. Measures taken by the government will take some time to reflect."

This article was first published in Business Recorder on Nov 24, 2021.