Rupee strengthens against US dollar, closes at Rs172.26

• Dealers believe sentiments turned positive in anticipation of the narrowing gap between the inflow and outflow of dollars.
• Currency has depreciated nearly 10% since June 2021.
• Analysts see the declining trend in the REER as an indication of a strong rupee.

KARACHI: The Pakistani rupee strengthened against the US dollar in the inter-bank market on Thursday.

According to data released by the State Bank of Pakistan (SBP), the local currency appreciated around 0.30% to close at Rs172.26, after having closed at 172.78 on Thursday. It has depreciated nearly 10% since June 2021.

The currency started recovering after Saudi Arabia announced late on Tuesday that it was depositing $3 billion in the State Bank of Pakistan (SBP) to help support its foreign reserves.

Forex dealers believe that sentiments on the domestic currency turned positive in anticipation of the narrowing gap between the inflow and the outflow of dollars.

Meanwhile, the Saudi fund had added that an official directive was issued to supply $1.2 billion to finance Pakistan’s oil products trade during the year.

The news was acknowledged by all financial markets as it positively impacted the foreign exchange reserves.

Moreover, Federal Minister for Energy Hammad Azhar had confirmed that the Saudi fund has also generously announced for Pakistan an oil deferred payments facility of $1.2 billion per annum.

Analysts believe this will ease the uncertainty due to the energy crisis and costly imports of oil which has been the major reason behind currency depreciation.

Meanwhile, the real effective exchange rate (REER) index is currently around 97 it has depreciated by 4% since the beginning of FY22 and by around 7% from its recent peak of 103 in April 2021.

Analysts see the declining trend in the REER as an indication of a strong rupee.