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Rupee snaps 5-day long winning streak

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2 years ago

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  • Rupee settles at 262.51 per dollar in interbank market.
  • Local unit closes open market trade at 269.
  • Pakistan’s REER index fall to 92.8 in January.

The Pakistani rupee snapped its five-day-long winning streak on Tuesday as the local currency shed 0.24% in the interbank market.

The local unit settled the day at 262.51 against the US dollar in the interbank market after a decline of Rs0.63 compared to Monday’s close of 261.88.

The last cycle of currency devaluation pushed Pakistan’s real effective exchange rate (REER) to 92.8 in January 2023 from 96.2 a month earlier, data from the State Bank of Pakistan (SBP) showed.

The decline in the REER — an index of the price of a basket of goods in one country relative to the price of the same basket in that country’s major trading partners — is driven by the rupee’s massive depreciation against the US dollar during the month of January.

In January, authorities decided to remove the cap on the exchange rate in a bid to meet one of the key lending conditions set by the International Monetary Fund (IMF) for the revival of its stalled $6.5 billion loan programme.

However, the rupee has maintained a rising trend in the last few days. Meanwhile, in the open market, the domestic currency loosed Rs1.25 to settle at 269 per dollar on Tuesday, according to the Exchange Companies Association of Pakistan.

Amid other developments, the National Assembly passed the IMF-dictated Rs170 billion Finance (Supplementary) Bill, 2023. 

Globally, the dollar index, which measures the US currency against six other rivals, was last at 104.11, just below a six-week high of 104.67 touched on Friday.

The market is now pricing US interest rates to peak at 5.30% in July and remain above 5% by the end of the year, moving away from expectations of deeper rate cuts this year. 

The yield on 10-year Treasury notes was up 2.3 basis points to 3.852%, after touching a three-month high on Friday. The yield of the two-year US Treasury paper, which typically moves in step with interest rate expectations, was up 3.5 basis points at 4.658%.

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ADB authorizes a $200 million loan for Pakistan to upgrade its power distribution system.

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A $200 million loan from the Asian Development Bank (ADB) has been authorized to update Pakistan’s power distribution system.

The project intends to improve data management and communication networks and deploy more than 300,000 smart metering equipment.

The project will involve improvements to voltage levels at SEPCO grid stations and monitoring systems for 15,500 transformers. LESCO plans to build or upgrade 25 grid stations with cutting-edge machinery. The initiative will reinforce income security, enhance demand management, and lower power losses, all of which will help to address

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Bulls recover from a sharp fall.

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The benchmark KSE-100 Index hovered at 111,005 points after rising more than 2000 points against the previous closing of 108,896 points, indicating that bullish momentum has returned to the Pakistan Stock Exchange (PSX) a day after a sharp bearish rally.

For the past month or so, the proverbial bulls have been galloping thanks to the cash infusion from the International Monetary Fund’s loan release and more discussions on climate funding.

The impending SBP policy rate-cutting meeting is another factor contributing to the current market mood. On December 16, the Central Bank’s Monetary Policy Committee is anticipated to convene.

Market analysts claim that the government’s decision to form a committee to address the outstanding problem of the Advances to Deposit Ratio (ADR) in the banking industry was the cause of the market’s abrupt collapse. However, the trend didn’t last long.

Following an extraordinary run of gains over the past month or so, the Pakistan Stock Exchange (PSX) reached a historic high of 100,000 points on November 30.

The KSE-100 index achieved one milestone after another in November 2024 amid recurring reports of economic stability, mainly due to the recent loan disbursement by the IMF.

The reassuring agreement with the international lender and Pakistan’s economic czar Muhammad Aurangzeb’s subsequent announcement ruling out a mini-budget boosted investor confidence in recent times.

The State Bank of Pakistan lowered the policy rate by 250 basis points to 15% on November 5.

Inflation dropped more quickly than anticipated and approached its medium-term target range in October, according to the SBP’s relevant committee.

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PSX 100-index reaches an unprecedented peak, exceeding 111,000 points.

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The Pakistan Stock Exchange (PSX) reached the significant milestone of 111,000 points shortly after today’s market opening.

The KSE-100 Index ascended by more than 1,000 points in the initial five minutes of trade, achieving a notable increase of 1,044 points to attain 111,014 points.

The increase indicates heightened investor confidence and a robust market sentiment.

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