Rupee upswing against dollar continues

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The rupee maintained its momentum against the dollar in the interbank market on Wednesday, increasing by Rs1.06 according to the State Bank of Pakistan.

The rupee has seen an upsurge in confidence as news of stringent administrative measures taken against black market dollar outflows to Afghanistan and Iran came to light.

Trade for the dollar closed at Rs288.75 in the interbank, 0.36pc lower than yesterday’s close of Rs289.80.

The rupee appreciated in the open market as well, rising by Rs1 against the greenback. The dollar was being traded at Rs290, according to the Exchange Companies Association of Pakistan.

Komal Mansoor, head of strategy at financial services platform Tresmark, credited the appreciation of the rupee to the unchanged interest rate by the State Bank of Pakistan in the recent monetary meeting despite expectations of an increase in interest rate by 200 basis points.

She said, “Significant correction in swaps, especially in the short tenors, has led to premiums declining from 18 per cent to near zero.”

This, she added, sent exporters into a flurry “to sell-forwards in response to an appreciating rupee.”

Furthermore, banks engaged in forward-selling transactions to realise their own goals, “however, the bulk of the decline in swaps came from banks engaging in buy-sell transactions to generate dollar liquidity to fulfil import demand”.