KARACHI: In September, the Pakistani rupee has secured the distinction of being the world’s top-performing currency, reaching a seven-week high against the US dollar. The rupee’s upward trajectory persisted for seventeen consecutive working days, culminating in a noteworthy close at Rs287.74 against the US dollar, representing a 0.35% increase or Rs1.01, as reported by the State Bank of Pakistan.
Arif Habib Limited, a prominent financial institution, announced that the Pakistani rupee had emerged as the best-performing currency globally in September 2023. During the same period, other strong currencies like the Mauritian rupee, Hong Kong dollar, and Canadian dollar posted gains of less than 1%. Conversely, over thirty currencies worldwide experienced declines ranging from 0.1% to 6.2% during the month.
Over the past seventeen working days, the Pakistani currency has exhibited a cumulative strengthening of an impressive 6.73%, rebounding from its record low of Rs307.10/$ on September 5, 2023. This remarkable performance has brought the rupee back to levels seen before the caretaker government took charge.
Economist Ashfque Hasan Khan attributes this remarkable recovery to the government’s crackdown on foreign currency smugglers, hoarders, and speculators. Khan underscores that the earlier pessimistic outlook for the rupee, which predicted a drop beyond Rs300/$, had fueled speculative depreciation, resulting in a 6% (Rs18.60) decline from August 15 to September 5, 2023. The subsequent clampdown on speculators and smugglers gradually restored the rupee to its fair value.
Khan argues that the connection between the crackdown and the rupee’s recovery underscores the absence of a market-based exchange rate, debunking speculators’ claims. The interim government had suggested that the actual value of the rupee was Rs260/$.
Local research also foresees further recovery, projecting that the rupee may strengthen to Rs278-280/$ in the current cycle. The crackdown has effectively eradicated black markets, boosted foreign currency inflows through official channels, and aided in stabilizing foreign exchange reserves at $7.80 billion.