Pakistan Rupee Climbs From Record Low in Rally Seen Ending

(Bloomberg) -- The three-month rally that helped Pakistan’s rupee rebound from a record low is coming close to an end, according to analysts and money mangers.

Asia’s second-best currency closed at 158.49 a dollar on Wednesday, gaining about 6% since reaching a low of 168.44 on Aug. 26, according to central bank data. The rupee completed a 20-day winning rally, the longest streak since the State Bank of Pakistan started making data available.

Stable foreign exchange reserves and a return to current-account surplus for the first time in five years, thanks to record remittances, have helped shore up the currency. The nation separately won $1.4 billion in emergency loan from the International Monetary Fund this year, while it also received funds from the World Bank and Asian Development Bank to deal with the economic impact of the Covid-19 outbreak.

“The recent appreciation in the rupee is mainly driven by FX inflows, positive market sentiments, and it is broadly in line with global USD weakness across major currencies,” said Pervez Shahbaz Khan, Global Treasurer at Askari Bank Ltd., in Karachi. “Future direction will depend on upcoming current account numbers.”

Pakistan’s foreign reserves, which have been stable at around $12 billion this year despite the pandemic, may face pressure amid reports that Islamabad will have to repay $2 billion to Saudi Arabia. The nation already repaid $1 billion of a $3 billion loan from the kingdom in August after Riyadh failed to criticize India’s move to end nearly seven decades of autonomy in Jammu and Kashmir state, which is also claimed by Pakistan.

While Samiullah Tariq, the head of research at Karachi-based Pak-Kuwait Investment Co., expects the rupee to strengthen to around 158 against the dollar, Ahfaz Mustafa at Ismail Iqbal Securities Pvt. predicts the currency to reverse gains.

“The rupee trend will reverse in the coming weeks as the U.S. election ends and dollar basket appreciates,” said Mustafa, chief executive officer at Ismail Iqbal. “The focus will shift more to local issues.”

Pakistan’s currency, which has been a managed-float for most of its history, has seen long periods of stability followed by devaluation. As part of a $6 billion loan approved last year to avert a default, the nation agreed with the IMF to adjust its currency to a market-based exchange rate that allowed it to move both ways.

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