The Pakistani rupee showed an appreciable gain of Rs 11, a 3.62 per cent increase against the US dollar when the markets closed on Tuesday, following the last-minute approval of funding by the IMF to the cash-strapped country.
In contrast, the Pakistan Stock Exchange showed a negative trend losing 341 points to close at 43,557 points after it saw its highest single-day-point surge on Monday.
“The Karachi Stock Exchange 100-index was slow today, and in total, 41 million shares were traded at Rs 16 billion today,” a dealer said.
But the Pakistan rupee showed a remarkable recovery in the currency market after the last-minute deal with the Washington-based International Monetary Fund (IMF).
In the morning session, the rupee had gained by Rs 15 in the intrabank, but by the time the market closed, it had confirmed a recovery of Rs 10 and was trading at Rs 275-76 in the intrabank.
The Forex Association of Pakistan said the dollar had traded at around Rs 271 in the interbank but settled down.
A spokesperson said the local currency had appreciated by Rs 10 at the end of trading.
Intikhab Ahmed from the Capital Investments firm said that the rupee gains and stock appreciation were due to the IMF deal, but the market’s positive notes needed to be closely followed this week.
“Finance Minister Ishaq Dar had given a clear hint that the rupee would gain as soon as the banks opened this morning, and that has happened,” he said.
The banks and market had closed from Wednesday to Sunday for Eid Holidays when the government announced the IMF deal.
Banks were also closed on Monday for clearing.
“We might see the dollar now stabilising around the Rs 275 range and around Rs 280 and 285 in the open market,” he said.
His opinion was backed by Zafar Bostan, President of the Forex Association.
Alpha Beta Core CEO Khurram Shehzad said the approval of the stand-by agreement with the IMF was the main reason for the decline in the dollar in the domestic market.
“You will see people who have been hoarding dollars now trying to unload them in the market after the Rs 15 decline today, and this might see an increase in the country’s foreign exchange reserves,” Khurrum said.
“And if this happens, then you will see an increase in remittances with banking channels because the hundi-hawala won’t take a risk,” he said.
In the open market, the currency also jumped by Rs 10 to reach Rs 285 against the greenback in the morning.
Pakistan on Friday signed a staff-level agreement (SLA) with the IMF for a new nine-month loan programme of USD 3 billion.
Experts said the first IMF tranche of USD 1-1.25 billion is expected in July and that new loan inflows from other multilateral creditors and friendly countries of around USD 1.5-2 billion would soon help in rebuilding the country's foreign exchange reserves and support the rupee against the greenback.
Although the reserves recovered to over USD 4 billion, they remained critically low, providing only one-month import cover.
Experts projected the currency might recover to Rs 270-275 against the USD, but the massive recovery would be temporary and last for a brief period of around two weeks.
On Tuesday, two leading global rating agencies warned that Pakistan requires significantly more funds than what it is receiving from the global lender to meet its debt maturities and finance its economic recovery.
Moody’s Investors Service and Fitch Ratings that issued the warning are two of the big three credit rating agencies recognised by the US Securities and Exchange Commission.
They noted that Pakistan has to repay USD 25 billion in the current fiscal year to meet its debt obligations.