Pakistani Rupee Softens by 6 Paisas Amid Rising Dollar Demand

On November 7, 2024, the Pakistani rupee slipped slightly against the U.S. dollar, weakening by 6 paisas to close at PKR 277.95 in the interbank market, compared to PKR 277.89 the previous day. This minor depreciation is attributed to an increase in dollar demand, driven primarily by corporate and import-related foreign payments. Despite this dip, analysts remain cautiously optimistic about the rupee’s long-term prospects, highlighting strong foreign exchange reserves and a narrowing trade deficit as key stabilizing factors.

The State Bank of Pakistan (SBP) recently reported a $32 million increase in foreign reserves, pushing total reserves to $16.049 billion as of October 25, 2024. Notably, the central bank’s reserves grew by $115 million, providing some resilience against external economic pressures and strengthening Pakistan’s balance of payments position.

Improving trade data has also helped to support the rupee’s fundamentals. The Pakistan Bureau of Statistics (PBS) reported a 5.59% reduction in the trade deficit during the first four months of the fiscal year (July–October 2024), with the deficit reaching $6.97 billion, down from $7.39 billion in the same period last year. This improvement is largely due to a 13.45% year-on-year increase in exports, which rose to $10.88 billion from $9.59 billion, driven by stronger demand in key international markets. This growth in exports helped offset a modest 5.17% rise in imports, which totaled $17.85 billion.

The rupee’s fundamentals have thus been bolstered by a more balanced export-import scenario, leading to cautious optimism among currency market experts. Higher inflows from exports and remittances, combined with controlled import spending, have provided essential support to the rupee. Currency analysts suggest that if these positive economic trends persist, the rupee may gain greater stability in the coming months.

“A sustained improvement in trade figures and continued foreign exchange inflows from exports could support a more stable rupee,” remarked a currency analyst. “The growth in reserves and reduction in the trade deficit create a favorable backdrop for the rupee, especially if export momentum is maintained and import levels are managed effectively.”

Looking ahead, the rupee’s performance will likely depend on continued improvements in trade, growth in foreign reserves, and prudent monetary policies from the SBP. As Pakistan advances broader economic reforms, sustained export earnings, healthy remittance flows, and moderated import levels could contribute to maintaining exchange rate stability. If these factors remain aligned, the rupee could see a relatively stable trajectory, aiding Pakistan’s pursuit of long-term economic stability and growth.