Rupee Up 88th Day in a Row Against US Dollar After SBP News

Steady gains reflect improved market confidence, SBP policy stance, and cautious currency management — but challenges remain for Pakistan’s economy

For the 88th consecutive day, the Pakistani rupee (PKR) strengthened against the US dollar (USD) in the interbank market, extending one of the longest sustained winning streaks in recent history. The local currency closed at Rs 279.82 per US dollar, gaining a few paisas in trading on Tuesday — a sign of continued resilience in exchange rate dynamics following recent policy signals from the State Bank of Pakistan (SBP).

This sequence of daily gains has drawn attention from investors, economists, market watchers, and policymakers, highlighting both short-term market confidence and deeper structural realities behind the currency’s performance.

What Triggered the Latest Rally?

The rupee’s extended appreciation trend follows key developments from the SBP’s monetary policy committee, particularly its decision to hold the benchmark policy interest rate unchanged even as many market analysts had anticipated a cut. This cautious stance signalled that the central bank prioritises exchange rate stability amid ongoing economic uncertainties and helped bolster sentiment among traders and foreign exchange market participants.

Market dealers noted that controlled dollar demand, active SBP participation in the interbank market, and a focus on reducing volatility have been significant supporting factors. In addition, reports suggest that the SBP’s foreign exchange interventions, including sizeable purchases from the interbank market over the past year, contributed to stabilising the rupee and rebuilding confidence.

Foreign Exchange Dynamics Beyond the Dollar

While the rupee continued to gain against the US dollar, its performance against other major currencies has been mixed. On the same trading day, the PKR strengthened against currencies like the UAE Dirham (AED) and Saudi Riyal (SAR), but weakened against the Euro (EUR) and British Pound (GBP). This divergence reflects global currency market pressures and relative strength of major currencies beyond the dollar.

What’s Driving Market Confidence?

Several factors underpin the sustained improvement in the rupee’s performance:

• SBP Policy Signals: By maintaining a steady interest rate and communicating a cautious economic outlook, the central bank has reduced speculative trading and signalled commitment to stability.

• Regulated Demand: Controlled demand for dollars in the interbank market, partly through monitoring of imports and reducing speculative flows, has eased pressure on the PKR.

• Foreign Exchange Resilience: Continued foreign exchange inflows via remittances and potential support from SBP reserves have helped market confidence. While data on reserves can fluctuate, interventions appear aimed at smoothing currency volatility rather than sharp adjustments.

Despite these gains, experts caution that the rupee’s trajectory remains sensitive to global economic shifts, commodity prices (especially oil), and external financing conditions. A stronger rupee can benefit consumers but may pose challenges for export competitiveness if appreciation diverges too far from economic fundamentals.

Broader Economic Implications

The prolonged strengthening of the rupee has several implications for Pakistan’s economy:

1. Trade Balance and Exports

A stronger rupee can make Pakistan’s exports relatively more expensive on the international market, potentially reducing competitiveness unless matched by productivity gains or improvements in export quality.

2. Import Costs and Inflation

For import-dependent sectors — such as energy, machinery, and raw materials — a stronger rupee may lower the cost of purchases priced in foreign currencies, which could ease inflationary pressures domestically. This effect is particularly important given global price volatility.

3. Remittances and Services Sector

Stability in the currency increases the real value of remittances received by overseas Pakistanis, which in turn supports domestic consumption and foreign exchange inflows.

4. Market Psychology and Investor Confidence

Consistent gains over nearly three months contribute to positive market sentiment, which can translate into improved business confidence and potentially attract investment — although structural challenges remain.

Risks and Future Challenges

While the rupee’s winning streak is encouraging, several risks could affect its future trajectory:

Global Economic Shifts: Changes in US interest rates, oil prices, or geopolitical tensions could alter capital flows and currency demand.

Domestic Fiscal Policy: Pakistan’s macroeconomic stability hinges on disciplined fiscal management, public debt dynamics, and structural reforms.

Export Competitiveness: Sustaining export growth amid currency strength requires productivity improvements and diversification.

Market analysts emphasise that short-term exchange rate improvements should not mask deeper structural imbalances. Long-term stability depends on enhancing foreign exchange reserves, expanding the industrial base, and strengthening institutional frameworks to manage external shocks.

Conclusion

The rupee’s 88-day consecutive rise against the US dollar signals a rare episode of sustained currency stability for Pakistan in recent years. Catalysed by SBP policy directions, managed demand, and cautious market sentiment, this trend reflects a degree of confidence in Pakistan’s foreign exchange management.

However, analysts stress that maintaining this momentum requires holistic economic strategies that balance exchange rate stability with export competitiveness and macroeconomic resilience. As global conditions evolve, Pakistan’s currency trajectory will remain a critical barometer of economic confidence and policy effectiveness in the months ahead.