KARACHI, Pakistan (Reuters) – The Pakistani rupee on Friday strengthened 2.38% in interbank closing at 278.46 rupees against the dollar, a day after the central bank raised its policy interest rate by 300 basis points (bps) to 20%, trading data showed.
The rupee, which fell more than 6% on Thursday, was trading at 275.5 against the dollar during the day, up nearly 3.5%, after the opening session.
“The rupee may have appreciated over the governors statement in the analyst meeting where he says the IMF has not asked to match the border rate,” says Mustafa Pasha, chief investment officer at Lakson Investments.
Pasha added that expectations of reaching a staff level agreement soon have shot up now that the government has floated the currency, withdrawn farmer/export subsidies, and imposed electricity surcharges.
He says, “On the other hand, it could be that the SBP has done a soft intervention or overseas Pakistanis decided to remit after seeing the rupee touch 286 against the dollar.”
The value of the local currency has been depreciating amid delays in a funding deal with the International Monetary Fund (IMF), which is crucial for the South Asian’s broken economy faced with a balance-of-payment crisis.
The sides have been negotiating a policy framework since the start of last month to agree on measures to bridge the fiscal deficit ahead of an annual budget around June.
A staff-level agreement is yet to be signed, which finance minister Ishaq Dar said on Thursday should be done by next week.
If negotiations succeed, the IMF will issue over $1 billion to Pakistan, which is critical to unlock other bilateral and multilateral funding.
A market-based currency exchange is one of several conditions the IMF has made to approve the funding.
Moody’s (NYSE:MCO) downgraded the crisis struck country unsecured debt ratings to ‘’Caa3’ from ‘Caa1’ on Wednesday. On Friday five Pakistani banks: Allied Bank Limited (ABL), Habib Bank Ltd. (HBL), MCB Bank Limited (MCB), National Bank of Pakistan (NBP) and United Bank Ltd. (UBL), were also downgraded to Caa3 from Caa1.
(This story has been corrected to fix figure in headline to 2.38%)
Source: Economy - investing.com
