Topline Securities, a brokerage firm, anticipates the PKR/USD exchange rate in the interbank market to be between Rs. 320 and Rs. 340 by June 2024. Their PKR outlook report notes that recent administrative measures have caused the PKR to appreciate in both the official interbank market and the open market.
Since the caretaker government assumed power, there has been speculation that the non-political interim administration may permit the Pakistani Rupee (PKR) to align with market forces as per International Monetary Fund (IMF) directives. Consequently, the PKR depreciated by 6 percent (from Rs. 288 to Rs. 307) in the interbank market and declined by 10 percent (from Rs. 296 to Rs. 328) against the USD in the open market between August 14, 2023, and September 4, 2023, as mentioned in the report.
The recent surge in the USD's value since August 14 was primarily observed in the open and black markets, where the premium (difference between open market and interbank rates) rose from 1-2 percent to 6-7 percent. To address this trend, the caretaker government and the State Bank of Pakistan (SBP) implemented measures to curb demand in the open market.
These measures resulted in a strengthening of the PKR over the past 9 working days. In the interbank market, the PKR appreciated by 4 percent, increasing from Rs. 307 to Rs. 296 against the USD. In the open market, the PKR surged by 10 percent, rising from Rs. 328 on September 4 to Rs. 298 as of September 18.
Despite this recent recovery, the PKR has been one of the worst-performing currencies in recent years, declining by 22 percent in 2022 and another 23 percent in 2023 against the USD. This decline is attributed to factors such as the external financing gap, challenges in global financial markets, and local political instability, which have placed pressure on foreign exchange reserves (currently below 2-month import cover) and the rupee's value. Regarding the future PKR/USD exchange rate, the survey reveals various expectations among market participants. Approximately 25 percent anticipate it to be in the range of Rs. 340-360, while 21 percent predict a range of Rs. 300-320. In contrast, 12 percent expect it to be lower than Rs. 300, and 5 percent foresee it exceeding Rs. 360. These responses reflect a range of perspectives on the potential value of the Pakistani Rupee.
In the short term, the report highlights that several factors will influence the Pakistani Rupee (PKR). These include the completion of the IMF review scheduled for November 2023, global oil prices, USD inflows from organizations like the World Bank and Asian Development Bank, the timely rollover of maturing loans, and anticipated foreign direct investment (FDI) in certain sectors.
According to a recent survey by Topline Research involving key market participants, 38 percent of respondents expect the PKR/USD exchange rate to fall within the range of Rs. 320-340 by June 2024, indicating the currency's potential trajectory.
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