The Pakistani rupee had been going up for five days in a row, but on Tuesday, it lost 0.24% on the interbank market.
On the interbank market, the local unit ended the day at 262.51 against the US dollar. This was down Rs0.63 from Monday’s close, when it was at 261.88.
Pakistan’s real effective exchange rate (REER) dropped from 96.2 in December 2022 to 92.8 in January 2023, according to data from the State Bank of Pakistan (SBP).
The huge drop in the value of the rupee against the US dollar in January is what caused the REER to go down. The REER is an index of the price of a basket of goods in one country compared to the price of the same basket in that country’s major trading partners.
In January, the government decided to stop putting a limit on the exchange rate. This was done to meet one of the main conditions set by the International Monetary Fund (IMF) for restarting its $6.5 billion loan programme, which had been put on hold.
But in the last few days, the rupee has continued to go up. According to the Exchange Companies Association of Pakistan, the local currency fell by Rs1.25 on the open market on Tuesday, settling at 269 per dollar.
The IMF told the National Assembly to pass the Rs170 billion Finance (Supplementary) Bill, 2023, which they did.
The dollar index, which compares the US dollar to six other currencies, was last at 104.11. This is just below Friday’s six-week high of 104.67.
The market now expects US interest rates to peak at 5.30 percent in July and stay above 5 percent until the end of the year. This is a change from earlier expectations that rates would go down even more this year.
After hitting a three-month high on Friday, the yield on 10-year Treasury notes went up by 2.3 basis points to 3.852%. The yield on the two-year US Treasury paper went up by 3.5 basis points to 4.658%. This is usually in line with what people expect to happen with interest rates.
