After a horrendous 2021 that saw it lose 10% of its value, Pakistan's currency ended the final session of the year with a bang, appreciating Re1 against the US dollar in the inter-bank market on Friday.

As per the State Bank of Pakistan (SBP), the PKR closed at 176.51 against the USD after a day-on-day appreciation of 100 paisas or 0.57%. Earlier this week on Wednesday, the PKR had closed at its all-time record low of 178.24 against the USD.

“This is the third-highest percentage day-on-day recovery during CY21,” said Arif Habib Limited (AHL) in a research note.

The gain on Friday follows the one made on Thursday when the rupee broke its losing streak.

Cumulatively, the rupee depreciated nearly 10% CYTD, 10.68% FYTD, and 13.65% since its CY21’s high achieved on May 14 against the US dollar.

"The unexpected recovery of Pakistani rupee against US dollar comes as exporters have sold dollars in the market," Samiullah Tariq, Head of Research and Development at Pakistan Kuwait Investment Company Limited, told Business Recorder.

“Exporters are encashing their LCs."

When asked about reports regarding central bank intervention, Tariq said, “I don’t think the SBP intervened.”

Talking about rupee performance throughout the year, Tariq said that the currency started off at 160 and also appreciated till mid-year.

“(However) opening of economies increased commodity prices, which created a balance-of-payments pressure, and drove inflation that was reflected in depreciation of the rupee,” he said.

Tariq said that the pressure would subside in the coming days, especially if the International Monetary Fund (IMF) board grants approval to Pakistan's Extended Fund Facility on January 12.

The article was first published in Business Recorder on December 31, 2021.